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Fundamentals of Taxation 2018 Edition, 11e (Cruz)
Chapter 6 Self-Employed Business Income (Line 12 of Form 1040 and Schedule C)
1) A sole proprietor's trade or business income or loss is reported on Schedule C, Form 1040.
Answer: TRUE
Difficulty: 1 Hard
Topic: Income for a Schedule C Trade or Business
Learning Objective: 06-01 Describe how income and expenses for a self-employed individual
are recognized and reported.
EA: Yes
Accessibility: Keyboard Navigation
2) For an expense to be ordinary, it must be customary or usual in the taxpayer's particular

business.
Answer: TRUE
Difficulty: 1 Hard
Topic: Trade or Business Expense
Learning Objective: 06-02 Explain the concept of ordinary and necessary business expenses.
EA: Yes
3) For an expense to be necessary, it must be essential to the taxpayer's business.
Answer: FALSE
Explanation: Necessary refers to an expense that is appropriate and helpful to the taxpayer's
business.
Difficulty: 1 Hard
EA: Yes
4) Fines paid that are ordinary and necessary in a trade or business generally are deductible.
Answer: FALSE
Difficulty: 1 Hard
EA: Yes
1
Copyright ©2018 McGraw-Hill
5) Depreciation is allowed for every tangible asset (except land) used either in a trade or business
or for the production of income.
Answer: TRUE
Difficulty: 1 Hard
Topic: Depreciation
Learning Objective: 06-03 Explain the calculation of depreciation for trade or business assets.
EA: Yes
6) If property is inherited, the property's basis for purposes of depreciation is the same as the
decedent's basis.
Answer: FALSE
Explanation: The basis is generally the fair market value at the date of death.
Difficulty: 2 Medium
Topic: Depreciation
EA: Yes
7) Under MACRS, the half-year convention is used for all real property.
Answer: FALSE
Explanation: The half-year convention applies to personal property.
Topic: Depreciation
EA: Yes
8) Taxpayers must use the mid-month convention when more than 40% of the personal property
is placed in service during the last three months of the tax year.
Answer: FALSE
Explanation: The above refers to the mid-quarter convention.
Topic: Depreciation
EA: No
2
9) The cost of all personal property is recovered using a 200% declining-balance rate under
MACRS.
Answer: TRUE
Difficulty: 1 Hard
Topic: Depreciation
EA: Yes
10) Under MACRS, the straight-line method is required for all depreciable real property.
Answer: TRUE
Difficulty: 1 Hard
Topic: Depreciation
EA: Yes
11) The §179 expense deduction is limited to earned income.
Answer: TRUE
Explanation: The §179 deduction cannot create a net operating loss. However, the total amount
of wages, salaries, tips, or other income earned as an employee is included as income derived
from a trade or business.
Topic: Depreciation
EA: Yes
12) "Listed property" includes only passenger automobiles.
Answer: FALSE
Explanation: Assets with some personal use component.
Topic: Depreciation
EA: Yes
3
13) Once the more-than-50% business-use test is met for listed property, it does not matter if the
business use falls below 50% in subsequent years.
Answer: FALSE
Explanation: Excess MACRS depreciation must be recaptured in the year the business use test
is not met.
Topic: Depreciation
EA: Yes
14) The luxury auto limits on depreciation must be reduced if business use is less than 100%.
Answer: TRUE
Topic: Depreciation
EA: Yes
15) Transportation costs are deductible when a taxpayer goes to a business meeting away from
his or her regular workplace.
Answer: TRUE
Difficulty: 1 Hard
Topic: Transportation/Entertainment Business Expenses
Learning Objective: 06-04 Describe travel and entertainment expenses and discuss their
deductibility.
EA: Yes
16) The standard mileage rate includes parking fees, tolls, and property taxes on the vehicle.
Answer: FALSE
deductibility.
EA: Yes
4
17) The standard mileage rate encompasses depreciation or lease payments, maintenance and
repairs, gasoline, oil, insurance, and vehicle registration fees.
Answer: TRUE
deductibility.
EA: Yes
18) The significance of meeting the "travel away from home" standard is that it allows the
deduction of meals, lodging, and other incidental expenses such as dry cleaning.
Answer: TRUE
Difficulty: 1 Hard
deductibility.
EA: Yes
19) Meals and entertainment expenses are limited to 50%.
Answer: TRUE
Difficulty: 1 Hard
deductibility.
EA: Yes
20) A business bad debt is treated as a short-term capital loss and can be deducted only when it
becomes completely worthless.
Answer: FALSE
Explanation: Business bad debts are ordinary deductions when either partially worthless or
completely worthless.
Difficulty: 3 Hard
Topic: Bad Debt/Home Office
Learning Objective: 06-05 Apply the rules for deducting the business portion of a residence and
business bad debts.
EA: Yes
5
21) For a cash-basis taxpayer, any account receivable that is not collected can be written off as a
bad debt.
Answer: FALSE
Explanation: For a cash-basis taxpayer, no income would have been recognized thus no bad
debt expense can be deducted.
Difficulty: 3 Hard
business bad debts.
EA: Yes
22) When business property is lost in a fire, storm, shipwreck, theft, or other casualty, the
taxpayer normally receives a capital loss deduction.
Answer: FALSE
Explanation: The casualty is an ordinary loss deduction.
Difficulty: 3 Hard
business bad debts.
EA: Yes
23) If an activity is characterized as a hobby, expenses are deductible only to the extent of
income from the hobby, subject to certain ordering rules.
Answer: TRUE
Topic: Hobby Losses/Educational Expenses
Learning Objective: 06-06 Explain the hobby loss rules and the limits on education expense
deductibility.
EA: Yes
6
24) Education expenses are deductible if the education maintains or improves existing skills or if
the education helps the taxpayer qualify for a new trade or business.
Answer: FALSE
Explanation: Education expenses are not deductible if they qualify the taxpayer for a new trade
or business.
Difficulty: 3 Hard
deductibility.
EA: Yes
25) Sole proprietors must pay self-employment tax on 100% of their self-employment income.
Answer: FALSE
Explanation: They must pay tax on 92.35% of their SE income.
Difficulty: 3 Hard
Topic: Self-Employment Taxes
Learning Objective: 06-07 Describe the calculation of self-employment taxes.
EA: Yes
26) Which expenses incurred in a trade or business are deductible?

A) Fines and penalties.
B) Supplies expenses.
C) Political lobbying expenses.
D) Bribes.
Answer: B
Difficulty: 1 Hard
EA: Yes
7
27) If inventory is a material amount, what method of accounting is acceptable for a sole
proprietorship to use?
A) The cash method.
B) Accrual method.
C) Hybrid method.
D) Both Accrual method and Hybrid method.
Answer: D
Difficulty: 1 Hard
Topic: Income for a Schedule C Trade or Business
Learning Objective: 06-01 Describe how income and expenses for a self-employed individual
are recognized and reported.
EA: No
28) Patricia, a professional gambler, had the following income and expenses in her business:
Gambling winnings $ 275,000

Expenses
Fees paid for illegal information 18,000
Travel costs $ 8,000
Office expenses 5,000
Supplies 3,000
Business long-distance phone charges 1,000
Tickets for illegal parking 900
How much net income must Patricia report from this business?
A) $0.
B) $239,100.
C) $240,000.
D) $258,000.
Answer: D
Explanation: $275,000 - $8,000 - $5,000 - $3,000 - $1,000 = $258,000. Illegal items are not
deductible.
EA: Yes
8
29) Which of the following is not a "trade or business" expense?
A) Mortgage interest on a warehouse.
B) Depreciation on business equipment.
C) Mortgage interest on a personal residence.
D) Cost of goods sold.
Answer: C
Difficulty: 1 Hard
EA: Yes
30) Trade or business expenses are treated as:

A) Deductible only if the activity had substantial income.
B) An itemized deduction if not reimbursed.
C) Deductible as itemized deductions subject to the 2% AGI floor.
D) Deductible as a for AGI deduction.
Answer: D
Difficulty: 1 Hard
EA: Yes
31) On May 26, 2013, Jamal purchased machinery for $30,000 to be used in his business. He did
not elect to expense the equipment under §179 or the bonus. On October 10, 2017, he sells the
machinery to a scrap metal dealer. What is his cost recovery deduction for 2017 rounded to the
nearest dollar?
A) $0.
B) $1,340.
C) $2,679.
D) $4,287.
Answer: B
Explanation: $30,000 × 8.93% × ½ = $1,339.50.
Topic: Depreciation
EA: Yes
9
32) On July 15, 2015, Travis purchased some office furniture for $20,000 to be used in his
business. He did not elect to expense the equipment under §179 or bonus. On December 15,
2017, he sells the equipment. What is his cost recovery deduction for 2017?
A) $0.
B) $1,749.
C) $2,858.
D) $3,498.
Answer: B
Explanation: $20,000 × 17.49% × ½ = $1,749.
Topic: Depreciation
EA: Yes
33) Della purchased a warehouse on February 25, 2017, for $350,000. $45,000 of the price was
for the land. What is her cost recovery deduction for 2017 rounded to the nearest dollar?
A) $6,853.
B) $7,865.
C) $9,705.
D) $11,137.
Answer: A
Explanation: $350,000 - $45,000 = $305,000 Basis × 2.247% = $6,853.35.
Topic: Depreciation
EA: Yes
34) Paola purchased an office building on January 5, 2015, for $450,000. $30,000 of the price
was for the land. On September 25, 2017, he sold the office building. What is the cost recovery
deduction for 2017 rounded to the nearest dollar?
A) $0.
B) $7,321.
C) $7,628.
D) $10,769.
Answer: C
Explanation: $450,000 - $30,000 = $420,000 Basis × 2.564% × 8½/12 = $7,627.90.
Topic: Depreciation
EA: Yes
10
35) On November 30, 2017, Constance purchased an apartment building for $750,000 (assume
this is the Depreciable Cost excluding any Land valuation). Determine her cost recovery
deduction for 2017 rounded to the nearest dollar.
A) $0.
B) $2,400.
C) $3,413.
D) $26,138.
Answer: C
Explanation: $750,000 × 0.455% = $3,412.50
Topic: Depreciation
EA: Yes
36) In June 2017, Kelly purchased new equipment for $26,000 to be used in her business.
Assuming Kelly has net income from her business of $75,000 prior to the deduction, what is the
maximum amount of cost recovery Kelly can deduct rounded to the nearest dollar, assuming she
does not elect §179 expense or bonus depreciation?
A) $3,715.
B) $13,000.
C) $14,858.
D) $26,000.
Answer: A
Explanation: ($26,000 × 14.29%) = $3,715.40
Topic: Depreciation
EA: Yes
11
37) In July 2017, Cassie purchases equipment for $55,000 to be used in her business. Assuming
Cassie has a small net loss from her business prior to the deduction, what is the maximum
amount of cost recovery Cassie can deduct?
A) $7,860.
B) $27,500.
C) $31,430.
D) $55,000.
Answer: C
Explanation: ($55,000 × 50%) = $27,500 plus regular depreciation on the remaining basis of
$27,500 × 14.29% = 3,929.75 (total $31,429.75).
Difficulty: 3 Hard
Topic: Depreciation
EA: Yes
38) §179 expense is available for all of the following business assets except:
A) Bulldozer.
B) Phone system.
C) Apartment complex.
D) Office furniture.
Answer: C
Explanation: Section 179 is not available for real property.
Difficulty: 1 Hard
Topic: Depreciation
EA: Yes
39) If property is converted from personal-use property to business property, the depreciable cost
basis is which of the following?
A) Cost of the asset.
B) FMV of the asset.
C) The cost of a new similar asset at the date of conversion.
D) The lower of the cost or FMV at the date of conversion.
Answer: D
Difficulty: 1 Hard
Topic: Depreciation
EA: Yes
12
40) The adjusted basis of an asset is:
A) The cost basis less any accumulated depreciation.
B) The cost of the asset.
C) The fair market value of the asset.
D) The trade-in value of the asset.
Answer: A
Difficulty: 1 Hard
Topic: Depreciation
EA: Yes
41) Which of the following properties is not eligible for the §179 expense election when
purchased?
A) A business automobile.
B) A business computer.
C) Rental property.
D) Manufacturing equipment.
Answer: C
Difficulty: 1 Hard
Topic: Depreciation
EA: Yes
42) Under MACRS, 5-year property includes:

A) Warehouse.
B) Apartment complex.
C) Automobiles and light trucks used in a trade or business.
D) Fruit-bearing trees.
Answer: C
Difficulty: 1 Hard
Topic: Depreciation
EA: Yes
13
43) The standard mileage rate encompasses all of the following auto costs except for:
A) Depreciation or lease payments.
B) Auto property taxes.
C) Maintenance and repairs.
D) Gasoline, oil, and insurance.
Answer: B
deductibility.
EA: Yes
44) Which of the following is incorrect regarding luxury automobile limitations?

A) Passenger autos with a gross weight of less than 6,000 pounds are subject to the limits.
B) Light trucks or vans that are less than 6,000 pounds are subject to the limits.
C) The limits are reduced further if the business use is less than 100%.
D) The luxury limitations do not apply to the Section 179 expense deduction.
Answer: D
Explanation: Section 179 expense is limited as well.
Topic: Depreciation
EA: Yes
14
45) Marcus has two jobs. He works as a night auditor at the Midnight Motel. When his shift at
the motel is over, he works as a short order cook at the Break-An-Egg Restaurant. On a typical
day, he drives the following distances:
Home to Midnight Motel 4 miles

Midnight Motel to restaurant 12 miles
Restaurant to home 8 miles
How many miles per day would qualify as transportation expenses for tax purposes?
A) 0.
B) 4.
C) 12.
D) 24.
Answer: C
Explanation: Commuting does not count as business mileage.
deductibility.
EA: Yes
46) Marion drives 20 miles a day from his first job to his second job. He worked 125 days during
2017 on both jobs. What is Marion's mileage deduction rounded to the nearest dollar assuming
he uses the standard mileage rate and mileage is incurred ratably throughout the year?
A) $77.
B) $1,338.
C) $1,400.
D) $3,905.
Answer: B
Explanation: 125 days × 20 miles/day = 2,500 miles × .535 = 1,338
deductibility.
EA: Yes
15
47) Which of the following statements is false with respect to the standard mileage rate?
A) The standard mileage rate encompasses depreciation.
B) The taxpayer can have an unlimited number of autos and use the mileage rate.
C) Section 179 cannot be used on a standard mileage rate auto.
D) The standard mileage rate cannot be used on a taxi.
Answer: B
Explanation: The standard mileage rate cannot be used if five or more cars are used
simultaneously in the business operations.
deductibility.
EA: Yes
48) Cole purchased a car for business and personal use. In 2017, he used the car 60% for
business (13,000 total use miles) and used the standard mileage rate to calculate his vehicle
expenses. He also paid $1,500 in interest and $360 in county property tax on the car. What is the
total business deduction related to business use of the car rounded to the nearest dollar?
A) $1,860.
B) $4,173.
C) $5,289.
D) $6,033.
Answer: C
Explanation: 13,000 miles × 60% = 7,800 business miles; (7,800 miles × .535 cents/mile) +
((1,500 + 360) × .60) = 5,289.
deductibility.
EA: Yes
16
49) Byron took a business trip from Philadelphia to Rome. He was away 16 days of which he
spent 9 days on business (including two travel days) and 7 days vacationing. His expenses are as
follows:
Airfare $ 1,100
Lodging (16 days × $140) 2,240
Meals (16 days × $115) 1,840
Byron's total travel (including meals and lodging) expense deduction rounded to the nearest
dollar is:
A) $2,396.
B) $2,878.
C) $3,395.
D) $5,180.
Answer: A
Explanation: ($1,100 × 9/16 foreign travel) + (9 days × $140/day) + (9 days × $115/day × 50%)
= 2,396.25.
deductibility.
EA: Yes
17
50) Chris runs a business out of her home. She uses 500 square feet of her home exclusively for
the business. Her home is 2500 square feet in total. Chris had $36,000 of business revenue and
$32,000 of business expenses from her home business. The following expenses relate to her
home:
Mortgage interest $ 12,400

Real estate taxes 1,800
Repairs 3,200
Utilities 2,600
Insurance 650
Depreciation (on business use portion of home) 1,750
What is Chris' net income from her business and the amount of expenses carried over to the
following year, if any?
Net Income Carryover

a. $ 0 $ 1,880
b. $ 0 $ 0
c. $ 4,000 $ 4,130
d. $ 36,000 $ 0
A) Option A
B) Option B
C) Option C
D) Option D
Answer: A
Explanation: 500/2,500 = 20% Business Use; $4,000 net - $2,480 - $360 - $640 - $520 = $0;
Excess insurance of $130 + $1,750 of depreciation = $1,880 carryover.
Difficulty: 3 Hard
business bad debts.
EA: Yes
18
51) In order for an employee to deduct home office expenses, which of the following must occur:
A) The business use of the home must be specifically for trade or business purposes.
B) There must be no other fixed business location.
C) The taxpayer's most important activities must occur in the home.
D) The home office must be for the convenience of his or her employer.
Answer: D
Difficulty: 3 Hard
business bad debts.
EA: Yes
52) If an activity is considered a hobby, which of the following is true?

A) None of the expenses connected with the activity are deductible.
B) None of the income connected with the activity is included in income.
C) The deductible expenses connected with the activity are limited to the income from the
activity.
D) The IRS has the burden to prove an activity is a hobby.
Answer: C
Difficulty: 3 Hard
deductibility.
EA: Yes
53) Which of the following individuals can deduct his or her education expenses?
A) An accountant who attends law school to get a law degree.
B) A medical doctor who attends a review course to obtain a financial consultant license.
C) A lawyer who goes to law school to get a specialized tax degree.
D) An accounting bookkeeper that takes a CPA review course to pass the CPA exam and become
a CPA.
Answer: C
Difficulty: 3 Hard
deductibility.
EA: Yes
19
54) Deductible education expenses include all of the following except:
A) Tuition.
B) Books.
C) Travel.
D) Room and board.
Answer: D
Difficulty: 1 Hard
deductibility.
EA: Yes
55) Shante is employed by a local pharmaceutical company where she earned $48,000 in 2017.
During the year, she also had self-employment income of $18,000. Her self-employment tax
rounded to the nearest dollar is:
A) $0.
B) $2,061.
C) $2,543.
D) $2,754.
Answer: C
Explanation: $18,000 × 92.35% = 16,623 × 15.3% = $2,543.32
EA: Yes
56) What form is filed to report the self-employment tax?

A) Form 1040.
B) Schedule SE.
C) Schedule C.
D) Schedule D.
Answer: B
Difficulty: 1 Hard
EA: Yes
20
57) Katherine earned $100,000 from her job at a local business in 2017. She also had $42,000 in
self-employed consulting income. What is the amount of her self-employment tax rounded to the
nearest dollar?
A) $0.
B) $4,498.
C) $5,935.
D) $6,426.
Answer: B
Explanation: $42,000 × 92.35% = $38,787; ($127,200 to limit for social security: 27,200 ×
12.4%) + ($38,787 × 2.9%) = $4,497.80.
Difficulty: 3 Hard
EA: Yes
58) For 2017, what is the social security tax rate and income limit for a self-employed
individual?
Rate Income Limit

a. 2.9 % Unlimited income.
b. 12.4 % Unlimited income.
c. 15.3 % $127,200.
d. 12.4 % $127,200.
A) Option A
B) Option B
C) Option C
D) Option D
Answer: D
Explanation: The social security limit increased to $127,200 for 2017 and the rate is 12.4%.
Difficulty: 3 Hard
EA: Yes
21
59) During 2017, Regina, a sole proprietor, had the following income and expenses from her
home jewelry business. Regina is also employed as an office assistant at a local business:
W-2 wages from employer $ 28,000

Proceeds from jewelry sales 15,000
Supplies for jewelry 5,000
Travel for jewelry 1,400
Charitable contributions to church 3,000
a. What income or loss should be reported on Schedule C?

b. What is Regina's AGI?
Answer:
a.
Jewelry Sales $ 15,000

Supplies (5,000 )
Travel (1,400 )
Schedule C income $ 8,600
b. $28,000 + $8,600 - $608 (½ of SE tax) = $35,992 - The charitable contribution does not go
into the AGI calculation. It is a from AGI deduction.
SE tax deduction = ((8,600 × 92.35% × 15.3%) * .50)
Difficulty: 3 Hard
EA: Yes
22
60) Bart has the following income and expenses for his Schedule C:
1099-MISCs received:
Jack's Builders $ 42,000
Smith's Fine Homes 35,750
Murphy's Builders 24,730
Total Revenue $ 102,480
Wages (46,000 )
Payroll taxes (3,519 )
Payroll tax penalties (300 )
License fee (200 )
Supplies (5,300 )
Cell phone (588 )
Meals (3,000 )
Internet service (780 )
What is Bart's self-employment income?
Answer:
Total Income $ 102,480

Wages (46,000 )
Payroll Taxes (3,519 )
License Fee (200 )
Supplies (5,300 )
Cell Phone (588 )
Meals (50%) (1,500 )
Internet Service (780 )
Self-employment income $ 44,593
EA: Yes
23
61) List and define the criteria for an expenditure to be deductible on Schedule C.
Answer: An expense should be ordinary, necessary, and reasonable. For an expense to be

ordinary, it must be customary or usual in the taxpayer's particular business. The "necessary"
criterion refers to an expense that is appropriate and helpful rather than one that is essential to the
taxpayer's business. The expense must also be reasonable in amount and reasonable in relation to
its purpose.
EA: Yes
62) Describe each of the depreciation conventions and when each is applicable.
Answer:
(1) Half-Year Convention - The half-year convention treats all property placed in service during
any taxable year as placed in service at the mid-point of such taxable year. The half-year
convention is used for all personal property unless the taxpayer is required to use the mid-quarter
convention.
(2) Mid-Quarter Convention - The mid-quarter convention treats all property placed in service
during any quarter of a taxable year as placed in service on the mid-point of such quarter.
Taxpayers must use the mid-quarter convention when more than 40% of the personal property is
placed in service during the last three months of the tax year, or if the tax year consists of three
months or less.
(3) Mid-Month Convention - The mid-month convention treats all property placed in service
during any month as placed in service on the mid-point of such month. The mid-month
convention applies only to real property (27.5-year, 31.5-year, and 39-year property).
Difficulty: 1 Hard
Topic: Depreciation
EA: Yes
24
63) Kiri acquires equipment (7-year property) on August 14, 2017, for $80,000. She does not
elect to expense the asset under Section 179 or the 50% bonus. She sells the asset on January 15,
2021.
a. What is Kiri's cost recovery deduction related to the equipment in 2017 and 2021?
b. What is Kiri's cost recovery deduction related to the equipment in 2017 and 2021 if the 50%
bonus is elected?
Answer:
a. 2017 - $80,000 × .1429 = $11,432 7-yr MACRS first year.
2021 - $80,000 × .0893 × ½ = $3,572 7-yr MACRS fifth year.
b. 2017- $80,000 × 50% = $40,000 first year + ($40,000 × 14.29%) = $45,716.

2021 - $40,000 × .0893 × ½ = $1,786 fifth year.
Topic: Depreciation
EA: Yes
64) Oscar bought an $800,000 apartment building on July 28, 2017. On August 15, 2017, he
purchased $300,000 of 5-year class assets. Oscar elects to take the maximum expense on every
asset. What is the maximum cost recovery deduction Oscar can take in 2017?
Answer:
Section 179 $ 300,000

27 ½ year Real Property ($800,000 × .01667) 13,336
Maximum Cost Recovery $ 313,336
This answer assumes that Oscar's trade or business is rental apartments and he is not limited on
the Section 179 by the income limitation.
Explanation: If the apartment building is not considered a trade or business, then the Section
179 would not be allowed.
Topic: Depreciation
EA: Yes
25
65) Lateefah purchased a new office building on April 1, 2017, for $3,000,000. On August 20,
2021, the building was sold. What is the cost recovery deduction for the year of purchase and the
year of sale?
Answer: Year of purchase: $3,000,000 × .01819 = $54,570.
Year of sale: $3,000,000 × .02564 × 7.5/12 = $48,075.

Difficulty: 1 Hard
Topic: Depreciation
EA: Yes
66) Xavier bought furniture and fixtures (7-year property) on September 15, 2017 for $515,000.
He elects to expense as much as possible under Section 179 but does not elect the 50% bonus.
Xavier's earned income for the year is $510,000. What is the maximum deduction Xavier can
take in 2017 for the equipment? (Round answers to the nearest dollar)
Answer:
179 Deduction $ 510,000

Cost recovery ($515,000 - $510,000 ) × .1429 715
Maximum deduction $ 510,715
Explanation: Section 179 is limited to $510,000 in 2017.

Difficulty: 3 Hard
Topic: Depreciation
EA: Yes
26
67) Tonia acquires the following 5-year class property in 2017:
Asset Date of Acquisition Cost

X January 15 $ 70,000
Y May 28 45,000
Z November 23 90,000
Total $ 205,000
Tonia does not elect §179 or bonus depreciation. Tonia has $300,000 of taxable income from her
business. Determine her total cost recovery deduction for the year.
Answer: Since more than 40% ($90,000/$205,000 = 44%) of the assets were purchased in the
4th quarter, Tonia must use the mid-quarter convention.
Asset X:
$70,000 × .35 24,500
Asset Y:
$45,000 × .25 11,250
Asset Z:
$90,000 × .05 4,500
Total cost recovery deduction $ 40,250
Topic: Depreciation
EA: Yes
68) On April 23, 2017, Bailey purchased an automobile for $25,000. The car is used 80% for
business and 20% for personal use. What is the cost recovery deduction for 2017 and 2018
assuming the 50% bonus was taken? (Round answers to the nearest dollar)
Answer: 2017 $25,000 × 80% × 50% = $10,000 but limited to $8,928 ($11,160 × .80 luxury
limit).
2018 ($25,000 × 80%) - $8,928 = $11,072 × 32% 2nd year MACRS = $3,543 - there is no further
limitation because it is below the max of $4,080 ($5,100 × .80 luxury limit).
Topic: Depreciation
EA: Yes
27
69) Nancy purchased a computer on July 15, 2017, for $5,000. The computer was used 70% of
the time in her business and the rest of the time her children used the computer to surf the Web.
In 2017, the computer was used 40% for business and 60% for personal use. What are the cost
recovery deductions for 2017 and 2018? (No §179 or bonus). Is there any recapture of
depreciation in 2017?
Answer:
Cost recovery for 2017 is $700 [$5,000 × .20 × .70].

Cost recovery for 2018 is $400 [$5,000 × 1/5 SL × .40]
Cost recovery recapture in 2018 is $350 computed as follows:
Depreciation taken in 2017 ($5,000 × .20 × .70) $ 700
Straight-line ($5,000 × .20 × ½ year convention × .70) (350 )
Recapture $ 350
Difficulty: 3 Hard
Topic: Depreciation
EA: Yes
70) Ted purchased a vehicle for business and personal use. In 2017, Ted used the vehicle 70%
for business (10,000 business miles) and used the standard mileage rate to calculate his vehicle
expenses. Ted also paid $1,200 in interest and $380 in county property tax on the car. What is
the total business deduction related to business use of the car in 2017?
Answer: The total business deduction related to business use of the car is calculated as follows:
Standard mileage rate (10,000 × 53.5 cents /mile) 5,350

Interest ($1,200 × 70%) 840
Property taxes ($380 × 70%) $ 266
Total auto deduction on Schedule C $ 6,456
The 30% personal interest is disallowed and the $114 of personal property taxes is deducted on
Schedule A if the personal property taxes are based on the vehicles value.
deductibility.
EA: Yes
28
71) Terry, a CPA, flew from Dallas to New York to attend a conference. The conference lasted
four days. Then she took three days of vacation to go sightseeing. Terry's expenses for the trip
are as follows:
Airfare $ 525
Lodging (7 days × $155) 1,085
Meals (7 days × $120) 840
Taxi from airport to hotel and back 70
Calculate Terry's travel expense deduction.
Answer: Terry's travel expense deduction is calculated as follows:
Airfare $ 525
Lodging (4 days × $155) 620
Meals (4 days × $120 × 50%) 240
Taxi from airport to hotel and back 70
Total travel expense deduction $ 1,455
deductibility.
EA: Yes
29
72) Bob took a business trip from Chicago to London. He was away 12 days of which he spent
six days on business (including two travel days) and six days vacationing. His expenses are as
follows:
Airfare $ 1,400
Lodging (12 days × $125) 1,500
Meals (12 days × $100) 1,200
Calculate Bob's travel expense deduction.
Answer: Bob's airfare must be allocated 50% to business use and 50% to personal use because
it is foreign business travel. Bob's travel expense deduction is calculated as follows:
Air fare ($1,400 × 50%) $ 700

Lodging (6 days × $125) 750
Meals (6 days × $100 × 50%) 300
Total travel expense deduction $ 1,750
deductibility.
EA: Yes
73) Sandy is the owner of ABC Loan Company. On June 2, 2016, ABC loaned Randy $80,000.
In 2017, Randy filed for bankruptcy. At that time, the bankruptcy court indicated that Randy's
creditors could expect to receive 30 cents on the dollar. In August 2018 final settlement was
made, and ABC received $20,000. ABC's policy is to deduct losses as soon as permitted. How
much loss can ABC deduct and in which year?
Answer: This debt is a business bad debt so ABC can claim a bad debt (ordinary) deduction in
the following years:
2016 - zero.
2017 - $56,000 [$80,000 (loan) - $24,000 (expected settlement)].
2018 - $4,000 [$24,000 (balance) - $20,000 (proceeds)].
business bad debts.
EA: Yes
30
74) Alan owns a ranch in Kansas. During the year, a tornado damaged one of his barns and
destroyed some equipment. The following information provides the details of the losses Alan
suffered from the tornado.
Adjusted Basis FMV Before FMV After Insurance Proceeds

Barn $75,000 $90,000 $ 40,000 $30,000
Bailer $25,000 $15,000 $ 0 $15,000
Truck $15,000 $18,000 $ 0 $10,000
How much loss from the tornado can he deduct on his tax return for the current year?
Answer: The loss is a business casualty loss. The casualty loss deduction is calculated as
follows:
Barn ($30,000 - $50,000) = $ (20,000 )

Bailer ($15,000 - $15,000) = 0
Truck ($10,000 - $15,000) = (5,000 )
Total casualty loss $ (25,000 )
business bad debts.
EA: Yes
31
75) Alice is a high school teacher who enjoys knitting. She knits scarves and sweaters and sells
them in a local boutique. Alice spends 10 to 15 hours a week knitting the scarves and sweaters.
Alice had sales of $6,000 and expenses of $10,000 related to knitting and selling the goods.
Alice's $10,000 of expenses consisted of $800 of interest expense and $1,600 in property taxes
for her building and tools, $3,000 in supplies, and $4,600 in depreciation charges. How would
Alice's income and expenses be reported on her tax return if her knitting activity is characterized
as a hobby?
Answer: Alice's income and expenses would be reported as follows:
Income (other income, Form 1040) $ 6,000

Interest expense (Schedule A) (800 )
Property Taxes (Schedule A) (1,600 )
Supplies (Schedule A Misc. Deductions) (3,000 )
Depreciation (Schedule A Misc. Deductions) (600 )
Income from hobby $ 0
The remaining depreciation is treated as personal and cannot be deducted or carried forward.
deductibility.
EA: Yes
32
76) Beau earned $35,000 of net earnings from a tax preparation business that he runs during tax
season. He also earned a salary of $100,000 from his full-time job. How much self-employment
tax must he pay for 2017? (Round calculations to the nearest dollar)
Answer: Beau's self-employment tax for 2017 is calculated as follows:
Soc sec. ceiling amount $ 127,200

Less: soc. sec wages (100,000 )
Net ceiling $ 27,200
Net self-employment income ($35,000 × .9235) $ 32,323
Lesser of net ceiling or net self-employment income $ 27,200
Social security portion of the tax ($27,200 × .124) $ 3,373
Self-employment earnings subject to the Medicare portion of
the self-employment tax: $32,323 × .029 937
Total self-employment tax $ 4,310
Difficulty: 3 Hard
EA: Yes
33
Another random document with
no related content on Scribd:
One day one of my friends came to tell me that the commandant
wanted to have my daughter and myself out of the place, but that he
could not find any pretext for sending us away. I used sometimes to
go to my farm to see how things were getting on there, but so many
“khakis” were about that I never knew how to come away quickly
enough.
The village had been occupied for about two months when one
day I saw to my dismay that the enemy were burning things
wholesale. That same evening they withdrew from the village.
A few days after they had left, our people came back with big
commandoes.
A week after the “khakis” had gone out of Lichtenburg General De
la Rey came back to the village, but after spending only a day or two
with us, he started again for the Rustenburg district.
Then General Douglas returned and occupied the village once
more. He came to our farm and took away all our sheep. When the
English had got all our cattle, they went off, and we could again
breathe freely.
I went to the place where the cattle used to be kept, and there I
found the shepherd waiting for me.[3] He had been able to recover
one or two hundred of our sheep, so that I and my children still had
something left to us to live upon.
[3] The shepherds are generally Kaffirs who live on the place.
The following statement shows strikingly in its simplicity how their
own Kaffirs remained attached to the Boers in spite of all the so-
called “barbarous treatment.”
Shortly afterwards General De la Rey returned to Lichtenburg.
But General Douglas had not moved very far off, and as soon as
he heard that General De la Rey was in the place he came back with
his troops at full speed. But General De la Rey was already far away
in the distance. Just to show the “khakis” that we were not as
starving as they thought, I made some bread out of the flour that my
husband had brought us and sent two fresh loaves to Douglas. The
English soon left to take up the pursuit again; and now the talk was
that they were in their 20,000 after De la Rey, and that this time he
would never manage to escape.
I said again, “Very well, you catch him if you can, but be good to
him.” A few days later he was still free; the 20,000 had not been able
to get hold of him.
Shortly afterwards Lord Methuen entered the village and took up
his quarters. He sent to fetch my two horses, but I would not let them
go. I said, “No, I will not give them up to you; I shall go and see the
General himself about it.” “Very well,” was the answer, “you can see
him to-morrow morning at nine o’clock; that will be the best time.”
The next morning I started off, but when I got there Lord Methuen
could not see me; he was too busy, they said. I felt very angry. I
turned to go back, when just as I had got to my carriage, one of his
orderlies brought me the message that Lord Methuen was ready to
receive me, and they took me to him. He asked what he could do for
me.
I answered, “For me you cannot do much, for as far as my cattle
are concerned I have lost nearly everything. But I have still two
horses left, and one of these belonged to my son, who is dead, and I
hope that you will not take it away from me.” He gave me his hand
and he said, “It shall not be taken away from you.” I thanked him and
went home again. Lord Methuen remained in Lichtenburg for a week.
When the place was once more empty General De la Rey came
back to the village. He remained with us for four days. The day he
left Lord Methuen returned.
There was a big fight that day not very far from the village.
Towards nightfall the burghers beat a retreat under General Lemmer,
and next morning the troops came back to Lichtenburg.
The following day the English commandant came to see me. He
had a hard task before him, he told me; he had been ordered to burn
my house down. I asked him where I was to go to with my children if
my house were burned down.
“I shall leave one of the buildings standing for you.”
I thanked him, and I said to him, “Burn them down, burn the others
down if you think it fit to do so. Even if you leave one for me, there
will still be four to burn. However cruel you may seem to be, yet God
is always gracious.”
He answered that it was very hard indeed for him; but that he had
his orders and he must obey.
All the same, he went away without burning any of the buildings.
Then came another trial. One afternoon, at about three o’clock,
they suddenly came to tell me that I must start for Mafeking with my
daughter in half-an-hour.
“And what about my other children then?” I asked.
“Have you got more children still?” asked the man.
I called all my children together.
“Very well,” he went on then, “you can take all your children with
you.”
“And for what reasons am I being sent away in this fashion?”
“When General De la Rey was here you took him in and sheltered
him.”
“Yes,” I answered, “I did take him in and shelter him; and I shall do
it five hundred times more if it please the Lord to spare him. I am
prepared to go away as a prisoner of war, but I will not do it of my
own free will. And you say to Lord Methuen that he knows very well
that my husband is only fighting for his rights and doing his best for
his country. I will tell you a parable for him. Instead of doing harm to
our cause, every step you take against us makes it one hundredfold
stronger. Where only one now calls for vengeance, hundreds shall
come to be avenged. He can send me wherever he likes, but it will
not do you any good. I never thought to be so badly treated in the
Queen’s name. I could not have believed that because you cannot
get the better of our men you would set to work against their
women.”
“Well,” he said, “I must not talk too much, for we have very little
time.” With that he left me and went to Lord Methuen; but he soon
came back again, and then said that I had not been ordered to leave
the place, but that it would be better for me if I were to do so.
“No, I do not think that it would be better for me to go away from
my own land. I would choose far rather to stay and suffer with my
own people than go away.”
“Very well, ask General De la Rey, then, what you had better do.”
“No, I shall ask him nothing of the kind. He has his own work, and I
shall decide and make shift for myself.”
“Very good; then I shall send and ask Commandant Vermaas to
take you away from here.”
“I can send one of my boys if you will only give him a pass through
your troops. Then he can go to Commandant Vermaas and ask him
to send me a span of oxen so that I can get away from here.” This
was agreed to. Later on it was said that the officers had decided to
let me stay on in the village, but that I had refused to do so, and had
declared that I was going away as soon as my oxen arrived.
They kept coming to see me the whole time, and were always
talking about the war, saying that the Boers had far better give it up.
I used to reply, Yes, it would be a good thing to see an end to the
war; but it is no small matter for a people to give up their country,
and that it would cost them a very great deal before they could put
an end to it.
I asked them, “How strong are the forces that the English have
sent to South Africa to fight us?”
“Nearly 300,000 strong,” was the officer’s answer.
“We have about 60,000 Transvaalers and Free Staters,” I said,
“and we have been fighting with you now for over fourteen months;
how can you possibly expect that we are going to give up our arms
of our own free will? No! You will have a great deal of trouble before
you bring that about.”
I was waiting meanwhile in great anxiety for the coming of my
oxen, so that I should be able to make a start. It was five days more
before they arrived, for the oxen were kept far away from the village.
I got everything ready in the meantime to be able to go off as soon
as they came, for I dreaded every moment that a fresh order would
come and that I should not be able to go. At last the oxen arrived.
When our friends saw that they were there, they came hastening
from every side to wish us God-speed. It was a hard thing for our
friends to see us sent away in this manner to wander without a
home. I said that no, I was beginning my travels willingly, but all
unknowing where they were going to end or what the future had in
store for me. One thing I knew, and that was, if all my friends were
left behind, my Heavenly Father would yet be with me.
I hastened to pack everything into the waggon, and prepared to
start on my pilgrimage.
On Friday, December 1, 1900, I drove out of Lichtenburg after
taking leave of my friends. The oxen were put to the waggon; the
children got into it. I had still a couple of milch cows that I could take
with me. I and my daughter followed behind in my carriage. It was
raining hard as I left my village behind, not knowing whether ever I
should step foot in it again. Lord Methuen’s order had been that I
was to go ten miles away from the village and not to come nearer.
Next day I came to the place where Commandant Vermaas and his
commando were staying. He told me that I could go to his farm and
remain there as long as I liked; but as my husband’s work then lay
for the most part in the Rustenburg district, I preferred to go on,
instead of staying at the commandant’s farm. So I went from there to
Kafferspan, a place about eighteen miles from the village of
Lichtenburg. When General De la Rey heard that I had been sent out
of the village he sent my son Coos to come to fetch me. Then I
heard that on the 3rd of December 1900 they had captured a convoy
near Magaliesberg and had struck a good blow at the English. I said,
“That is right! It is not only I who have been in adversity; they too”
(the English) “have had their reverses.”
I went from there to Zuurfontein, a place belonging to Mr
Kritzinger, not far from Rustenburg; he gave me a house to live in.
The people there were all kind and friendly. After I had been staying
with Mr Kritzinger about a week, General De la Rey arrived with his
staff; it was a great delight to see them all again. It was a good thing
for them, also, that I was out of the village. But after having remained
a few days they had to go off again to join the commando. Where I
was living was not very far from the English camp; it was a
mountainous district, and we could hear the cannon shots distinctly
every day. On the 13th of December General De la Rey took
General Clement’s laager, at a place called Nooitgedacht, behind the
hills, and for a short time after that there was no more fighting. As
Christmas was coming nearer and nearer, I had been wondering
what sort of a Christmastide it would be for me; but as the English
still kept quiet, General De la Rey and his staff came back to us
again. They arrived just the day before Christmas, and once more I
had the great joy of having my own dear ones round me. There were
a great many people on the farm where I was then staying, and on
Christmas Day many friends came together there. As soon as
Christmas was over they all went away again to the commando; but,
as there was nothing to be done that week, our people all returned
for the New Year, and, owing to this, we were also able to spend a
happy, though quiet, New Year’s Day together. A little while later they
heard that many English laagers were trekking up, and that the place
where I was staying lay right in their way, so that I had to pack up
everything in the greatest haste ready for flight. The day was just
over when I got this news, and we had to pack the waggon in the
dark. Very early the next morning we left the farm behind us.
As I had some cattle and sheep this time to take with me, and as
we did not exactly know which way the English were coming, we
could not think where to move to for safety. After going some
distance, we waited to hear from which side the laagers were
coming. In a day or two we heard that the English troops had gone
back again, and so I went back also to the farm belonging to Mr
Kritzinger, whose family had accompanied me in my flight. I stayed
with them there for two months, and often heard the booming of the
cannon among the mountains.
Mrs De la Rey beside her waggon.
For nineteen months after that I wandered round in my waggon,
and, just as one gets attached to the room in which one sleeps, so
did I grow to love my waggon. Many a stormy night, when it was
blowing and raining, have my Kaffirs had a hard job to get the
sailcloth covering firmly fixed, so that the wind should not blow it right
away. Over many a hill and across many a river this waggon has
taken me safely. For in my darkest and most anxious nights never
did I fail to put my trust in the Lord, and never did His guidance
forsake me. Sometimes in my journeyings I would come to houses
which had not been completely destroyed, and where, perhaps, one
room would still be under shelter; then I would have it cleaned
quickly; we would stay there during the heat of the day. Sometimes I
would come to a place where I had meant to spend a few days, and
then at once would have to leave in all haste and continue my flight.
One day we came to Mr Basson’s place (in the Lichtenburg district),
and, almost the same moment, General De la Rey and his staff
arrived from the Zwartruggen (in the district of Rustenburg). When
he came up with my waggon he was tired out, and, after having
some dinner, he got into the waggon to lie down a little and rest. But
he had hardly been there half-an-hour when a man came hurrying
up, crying, “Why are you all so quiet here? The “khakis” are upon
us!” And there were the “khakis,” just half-an-hour’s distance on
horseback from my waggon. There was no commando that could
have turned them; General De la Rey and his staff flew to saddle
their horses, and jumped up and rode out to see what the “khakis”
were doing. When they (General De la Rey and his staff) had ridden
up the rise they saw that the English troops were drawing back.
Then I had to fly still farther. A bare country lay before me to be
crossed, and I thought that this time I should never be able to get
away safely, but we found afterwards that though the “khakis” had
been so near us they had had no idea of it, and we managed to
come away safe and sound. The same thing often happened, and it
seemed wonderful that I was not taken prisoner. As they had blocked
up all the roads with their blockhouses, it became so difficult to get
through that I had to go in the direction of Harts River, a bare and
unpleasant tract of country. As we went on we found thousands of
dead sheep lying about, killed by the English. They had not been
able to keep up with the march, and had been driven together and
slaughtered, and there they were scattered, some shot, others cut
down, and others with their heads taken off by a sabre cut. Many a
time did I repeat, “Ah, this is indeed a cruel war! What bitter suffering
has it not caused both to man and beast!” Often I have thought,
“What is going to come out of all these trials and troubles!” Even
when I looked at the comet I wondered what it could portend that it
should appear three mornings running in the east, and then again
every evening in the west, during a whole month—this was in the
months of June and July 1901. As I was journeying on the open veldt
I could see this star plainly every evening; and when this sign was no
longer to be seen, then another made its appearance. Every evening
after sunset this other token appeared in the sky; a bright red
radiance filled the air, and would remain visible for about three-
quarters of an hour.
“Whither, pilgrim—whither art thou flying?

We are driven onward by the enemy’s sword.
A terrible sword are the guns and the cannon,
When man is standing on his defence;
But the cruel sword of fire and of hunger,
Cutting its way through the heart of a mother,
Is more terrible still than the booming of cannon.
The keen-edged sword of destruction and terror,
Piercing the hearts of Africa’s children,
Has taught them a lesson they shall not forget.”
I thought that the enemy were now so far away that we should be
able to spend some time where we now found ourselves.
General De la Rey fell ill once more and had to join me and take to
his bed. Early one morning I had just got up when suddenly we
heard the sound of firing. The English were then only one hour’s
distance from us; they had covered a great deal of ground in the
night, and had been for five or six hours in the saddle, hoping to
catch the burghers at Tafelkop. General De la Rey sprung out of bed.
The horses were saddled in a moment, and off they rode. The firing
was coming nearer and nearer. I thought to myself, “I am in for the
fighting to-day,” but all the same I began packing everything into the
cart as quickly as possible. Very soon I was in flight once more. It
looked as if things were going very badly, for all round me people
were hurrying as hard as they could. It began to rain. The waggons
and the mule carts came tearing past, and it began to look as if I
were going to be left behind. It was raining heavily. The booming of
the cannon sounded closer and closer, and the danger became
greater every moment. Then suddenly my waggon stuck fast in the
mud, and I could not go on any farther. It kept on raining, and the
burghers kept coming on in greater numbers. They stopped by my
waggon and tried to drag it out of the mud. The fighting kept on, and
I told them to go away and leave me before they too were forced to
share my fate. “No,” they said; “that we will never do. What would the
General say if we were to leave you here and the ‘khakis’ were to
take you?” The oxen would not pull any more because they stood in
so much water. Then the people took hold of the wheels and they
managed to drag it out. After the waggon had stuck fast I went on
farther in the spider. There were now so many waggons and
carriages all close together that it looked like a big commando. In the
afternoon we stopped to rest; the rain cleared up for a little and we
had something to eat. Very soon came the order to get ready to start
again. We had not gone very far when the waggon in front remained
leaning against a steep bank, over which it had to climb. It was
raining heavily again. I thought, “How will things go with us to-day,
we have so many hindrances, and the ‘khakis’ keep on advancing?”
However, there were a good many burghers, and they helped to get
the waggons across. My spider also came to a standstill against the
rocks, so that they (the burghers) had to drag it out. We were in
danger, and yet we really enjoyed ourselves so much that time went
quickly. It took several hours before all the waggons had got through.
Then we drove on more quickly, and by sunset we came to where
we meant to spend the night. I drove to a house to wait till all the
waggons had arrived. There was so much water round the house
that it was impossible to tell where there were ditches or hollows.
When driving towards the waggons I went into a deep ditch and my
driver was thrown off. I and my little son remained sitting in the
carriage; the horses started off. They swerved towards the side of
the house; fortunately there were some burghers there who ran in
front and stopped them. It was already dark. I suggested that they
had better be unharnessed; I would walk to the waggon. Just then
my husband came up with his riding horse Bokkie for me to ride to
the waggon. However, Bokkie’s back was too narrow; as sure as I
climbed up, off I would slip. Then his other saddle-horse came up,
and off we rode to the waggons. All were there now, and very
hungry; it was dark and damp, but luckily, with some dry wood, we
soon had big fires going to prepare food. The enemy had not come
much nearer. After a good meal we went to sleep, and early next
morning I went on again with the waggons. The men folk joined the
commando, and at Rietfontein, where I had made up my mind to
spend some time, I went into the school, then empty. There were a
good many people in the place, and one could get vegetables and
fruit. But I had been there for only about a week when suddenly a
large number of English troops entered the Rustenburg district
where we were. Off I went again in great haste, this time to the
Lichtenburg district. I had to drive hard to get past. I was lucky, and
came safely through. Passing Lichtenburg, I came to Badenhorst,
and found a deserted shop in which I could take up my abode. Here
also we had kind friends, who took care to keep us supplied with
vegetables. One evening, a fortnight later, just as I had gone to bed,
the report was spread that the “khakis” were coming. It was very
dark and cold, but I was soon up and dressed and had the waggons
packed, and off we went again on the road. Next morning it seemed
true that the “khakis” were behind us; once again we drove past
Lichtenburg. Now there seemed nothing left for me but to fly with all
possible speed to the Zwartruggens. When I got there Mr Joubert
came on with me and brought me far into the mountains. “Here,” he
said, “no ‘khakis’ had found their way yet.” And there I had to stay.
There were many big trees growing, and the Marico River looked
lovely as it flowed along; it was a pleasant spot to stay in. I made an
oven so as to be able to bake my bread. I set up my hut in the cool
shade of the trees, where all looked so beautiful and green, and
made a stable for my horses with some trees and a kraal for the
sheep, just as if I were destined to live here a long time.
My soap was all finished and I began much to feel the need of it to
keep my children clean.
I was advised to burn some vogelsent[4] to make soap out of the
ashes. I gathered some “vogels,” had them burned, and succeeded
in making some good soap. The children wandered on the mountain
side searching for wild honey. I thought that if the “khakis” did not
worry me, I should remain here for a long time. But after a fortnight
my husband turned up, and said that it was too cold to live out on the
veldt, and we went back to the farm belonging to Mrs Lombard. From
there General De la Rey and his staff went on to the Free State,
where they were to meet President Steyn and General De Wet. I had
been here only twelve days when early one morning the cannon
suddenly began to make such a threatening noise that I hastened to
pack up my belongings and fled away once more. At Drinkfontein I
thought that I would wait and find out where the “khakis” were
moving to. But soon I heard again the roaring of the cannon. At that
moment I was making some candles; water and fat were both hot. It
was high time to be on our way, and I said, “Get ready and make a
start; but I must somehow or other finish my work.” The oxen were
not by the waggon, so that it was some little time before everything
was ready; and I had finished my candles when the waggon was
prepared to start. Then we were again flying as hard as we could
through the Lichtenburg district across the Harts River. It is not a
pleasant country to wander in; there are no woods or shady trees;
and as soon as the “khakis” had gone back, back I returned also, to
try to find better headquarters. And so the time passed till General
De la Rey returned. Then he went away again, back to the
Wolmaransstad district. Meanwhile I kept wandering around.
Suddenly we heard that many of the enemy’s laagers were
advancing together towards Klerksdorp. I went on some distance
farther, and then from all sides the people began to hurry onwards,
so that the flight was now beginning in earnest. The troops were
advancing in great force. We fled in the direction of Makouwenkop
and then were joined again by General De la Rey. At last the Boer
commandoes managed to get through, so that they got behind the
English. Then we had to fly as hard as we could so as to keep in
front. Some people went back that night, hoping to break through the
English troops. They said that I ought to go with them; but I said,
“No, I shall go forward, and I shall see if I cannot escape that way.”
[4] Vogelsent.—Lumps of resin that exude from certain trees.
When we came to the Vaal River we were forced to turn about. We
took another way back. After driving all day, we stopped for a little.
We had to get food ready as quickly as possible. It was very dark;
but later the moon began to shine. We fled on in great anxiety,
knowing that at any moment the “khakis” might be upon us. My
husband said that it would be too bad if they were to take me
prisoner when he was near the waggon, for he would have to fight
then, and to leave me to myself. I said, “Nay, do not let that disturb
you; do what you can to escape when they come; the Lord has
always preserved me until now, and He will continue to do so.” At
midnight we stopped for a little to let the oxen take a rest; but after
an hour or two we pressed forward again in good earnest. Bokkie
was saddled and marched behind the waggon, and all were ready to
meet the “khakis.” We hurried on; it was near the break of day, and I
thought to myself how grateful I should be to the Lord if it pleased
Him to guide the course of the night so that I might not be taken. It
grew light and the sun began to shine. All was quiet and we stopped
to rest. Then it was reported that the “khakis” had gone past us.
We were all very happy, and after we had had something to eat,
and had taken a little rest, we went once more on our way. It was
Saturday, and we hoped to be able to spend Sunday in peace. When
we had gone on again, I sat in my waggon and felt very thankful that
this time I had again escaped with my freedom. And then the words
came into my head, “Offer your thanks unto the Lord, and call upon
the name of the Almighty.” “Yes,” I thought, “that is what I have done
in my need; praise be unto the Lord that He has preserved me from
falling into the hands of mine enemy. The good God has saved me
now and many a time before.”
On Sunday we found ourselves in Brakspruit, and there we spent
a peaceful Sabbath day: on Monday we set out for Wolmaransstad,
there we found our houses in ruins. It was dreary to return and find
the place in such a plight.
A little way from Wolmaransstad we went to Mr Bezuidenhout’s
farm and found that his house was fortunately still intact. We were
able to bake bread there and make preparations for our next flight.
After remaining there a week we went back to the Lichtenburg
district. At Malgasfontein I found refuge in a house whose owners
had been taken by the “khakis.” As I had a good number of oxen with
me, and it was raining just enough, I had a lot of mealies sown there,
for we were constantly doing whatever we could to keep things
going. Everybody sowed and planted wherever possible. The
“khakis” might destroy as much as they liked, the Boers were still full
of courage.
I had great difficulty at that time to keep things straight; as I have
many children it grew extremely difficult to keep them all clean. Soap
was still very scarce; I could not get more anywhere. As far as
clothes were concerned I was happy as long as they were only
clean. A man told me he had scraped off some deposit of saltpetre
from a wall at Schoonspruit and had made good soap. As soon as
possible I got a bag of it and also made some very good soap, so
that I had not to worry about that any longer.
After we had been here about three weeks General De la Rey
came back from the Zwartruggens after the defeat of Colonel Van
Donop, which took place at Kleinfontein on the 24th of October 1901.
It was on the 24th of October 1901, the very day that we had been
married for twenty-five years, that a terrible battle was fought, in
which many people were killed or wounded, and among them one
more good friend of ours, Commandant Kritzinger, and his son, both
of whom were killed. So that we had on this day, instead of a silver
wedding feast, a terrible shedding of blood. There were great losses
on both sides. But the burghers were now, however, well supplied
again with clothes and other things which they had been needing
badly. We had made up our minds to stay here, when suddenly
came the report that the troops were advancing. We made a hurried
start in the direction of Harts River, and went on from there till past
the Zoutspannen. When the enemy had gone off in another direction
back we went again slowly all along the Harts River. Whenever we
thought that we were going to be left in peace for a little while, we
would find that the English troops were coming in such numbers that
we would have to go on trekking backwards and forwards without
any respite. With the approach of Christmas things grew quieter. I
went to Doornfontein, Badenhorst’s place. The houses had been
injured but not quite destroyed, so that I was able to make use of
one during the time that I remained.
My people were all with me; we spent a pleasant Christmas. Still,
we were not very far from Klerksdorp, where there were so many
“khakis” that the day after Christmas we had to begin our march
again. A few days later I got a message telling me to turn back to
Doornfontein; and there we all met again and spent the New Year.
That was in 1901. The day after New Year’s Day there were so many
“khakis” about that I had to fly past Lichtenburg and take refuge in
the Zwartruggens. Putfontein, where I next found myself, was utterly
destroyed and burnt down. As I was greatly concerned because my
people had no bread with them, I wandered round the desolate place
hoping to find an oven which had not been destroyed. All the ovens
had been broken down, but at last I found an attempt at one that the
poor women had set up and used for preparing bread. I said, “It does
not look of much use, still I shall try what I can do.” It was late in the
evening and rain was falling. There was no wood to be got, but I
went on with my breadmaking, and the boy (a Kaffir) had to try and
make a fire somehow or other. He was a very sharp boy, and he
succeeded in heating the oven.
General Kemps had his laager in the same place. In the evening
all the burghers came together, and they asked me if I would join in
their worship. “With pleasure,” I said. It was then quite dark. I went to
the laager and we had a short service, and after that sang songs out
of the “Kinderharp.” It was so pleasant that I quite forgot to bake my
bread. We also sang beautiful hymns that they themselves had
composed, so that I had a very pleasant evening. I hurried to the
oven, where I found that the biscuit had risen. It seemed as if the
oven were not hot enough, and yet I could not get any more fuel for
it. I put all the bread in and thought “let it bake itself as best it can.” I
waited till I thought that it was ready and then I sent Sampson, the
boy, to bring it out of the oven. He came back with it and it looked
still as if it were quite raw. However, it was always something to eat. I
went to sleep. Next morning I had hoped to be able to spend a
peaceful Sunday. A little way from my waggon were some big trees,
and as many burghers were there, we all agreed to meet under the
trees to hold our service. I and my children were there and many
burghers; but as all had not arrived we waited a while until the leader
said he would go on with the service, and then the people would
come fast enough. After we had sung he began to speak to us, but it
did not look as if any more people were coming. We were some
distance from the waggons and could see that there everyone was
hurrying backwards and forwards. I thought that the old man did not
seem very much inclined to put a stop to his service, but things
looked to me so grave that I said that we must really go to see what
was happening. We hurried back to the waggons, and very soon we
could hear the firing. I started off as quickly as possible. Very soon
many people in their waggons were keeping up with mine. We fled
for some distance and then sent out scouts a little way back. General
De la Rey with his staff came up. It was he who had been under that
heavy firing; a mark was on his back where a bullet had whizzed
past. They had all escaped unhurt and were very hungry and tired. It
was then that the bread I had baked the night before served in good
stead. They ate some, and that same evening they had to go back. I
was thus able still to supply them with bread. I went on to the
Zwartruggens this time; I did not want to go so far into the mountains
as it was beginning to be very warm there. On the slopes of the
mountains large trees were growing. I set up my tent in the shade.
There was fruit to be had: my children were happy.
Then I heard that the enemy were coming with their blockhouses
towards Lichtenburg. Then I knew I must go out of the mountains; I
did not want to get blocked up. And we went away again, after
having been a week there.
At Duikfontein I found large numbers of cattle and sheep that our
people had brought through the lines. General Kemp’s commando
had succeeded in doing this and in bringing cattle to other districts
also. I was still waiting there when General De la Rey arrived with his
staff. By that time I felt quite rested. He said that it was not
necessary for me to go at once to Rustenburg. So we merely went to
a place not very distant. A day or two later there were again so many
“khakis” gathered in Lichtenburg that we did not dare stay longer, as
it was only three hours’ distance from the village. We went from
there to some untilled ground belonging to us, which we kept for the
cattle, two and a half hours away from Lichtenburg. It was a good
neighbourhood for fruit; there was plenty of water, and not very
distant was a large fruit farm. We hoped thus to be able to stay for a
while. We sent the waggon to get fruit, and we set up our tent under
the cool trees.
“The picture of my wandering life”.
And here you have the picture of my wandering life. When I could
set up the tent under shady trees and cover the floor with green
grass, then I felt thoroughly happy and content. Often when in such a
good place I thought to myself, “If only I could stay here quietly for
some time how happy and pleasant it would be!” And sometimes I
had the good fortune to be able to stay for two days or a week in
such a spot. But at other times it would happen that just as I had got
everything in good order, then the “khakis” would be upon us and
everything would have to be taken down quickly to make a fresh
start. Often we fled until the middle of the night, and when we could
stop to rest it would be so dark that it was impossible to see one’s
hands before one’s eyes. Yet the tent would have to be put up before
we could get to sleep.
When I saw the bright sun shining in the morning, often I thought,
“How much pleasanter the sunlight is than the darkness; what joy will
it be for me when the sun of peace is shining for me again!” Then
again I would come to a whole district where not a tree or cool spot
was to be found. The only cool place would be just under the
waggon, on the ground, and that was so uncomfortable that I could
not help sometimes crying out, “Why should I have to suffer so
grievously?” but the next moment I would think, “After the bitter
comes the sweet.” When I left my house and went into Lichtenburg
to live in the village, because I felt so lonely on my farm, I thought I
was going to stay there until the war should come to an end. I never
imagined that I should never set foot in my house again. I was
always particular to keep my house neat and clean; it was the
greatest pleasure I had to keep my home in good order. I used to
think sometimes, “Perhaps it is not right that I should think so much
of my house,” and yet I could not help it. A pretty home on a farm,
with abundance of cattle and all that is needful, always seemed to
me the happiest life. When I was wandering over the veldt with a
tent, and especially when I came to dusty and sandy places, I kept
thinking all the time of my house, so clean and so cool. The day they
told me that it had been destroyed I could not keep my tears back. It
was so hard out on the veldt and I had longed so often for my house;
now I had to hear that it had been broken up and razed to the
ground.
But I told myself quickly that I must not weep. “Why should I be
better off than all my fellow-sufferers whose houses had also been
broken up or burned down?”
I went back again, this time to Gestoptefontein. That evening
General De la Rey was in the neighbourhood, but I knew nothing of
his movements nor he of mine. But he arrived the next morning, for
the English were now closing up on every side. I got breakfast ready,
and after the men had had something to eat, off they had to go
again, this time to trek up against Methuen. I remained in
Gestoptefontein so as to be able to find out where the troops were
moving; and it was soon reported to me that they were coming in my
direction. These were the troops from Klerksdorp, so there we were
again, exposed to the danger of being surrounded. So many of us
came trekking on that we kept getting into one another’s path; but
we could only say, “The more the merrier,” and go on without losing
courage. “Now we should have to go to Waagkraal,” said everybody.
I said, “Very well, the place has a good name, and so we can venture
it.” It was a very dark night when we reached there. We were all
hungry, and had first of all to get our food ready. After that we went
to sleep, and early the next morning a couple of hundred of our
burghers arrived also.
They were all going nearer now to see what they could do against
the English forces, but there were so many troops they could not tell
where to begin.
Most of them went on towards Methuen’s laager to see what they
could find to do there. The enemy’s troops moved forward to meet
them. Our burghers were now in Pretorius’s place, where I had been
staying quite lately; the English army was coming up along the Harts
River.
I was now so far from the Boer laager that I began to fear that if
the English drove them away I should certainly fall into the hands of
the enemy. We waited in great anxiety to hear what would be the
result of the battle. The country was very bare and exposed just
there, and as the troops had many guns with them it was dreadful to
think of the fighting. Yet on the evening of the 1st of March there
came a report that the laager was taken and that Lord Methuen had
been wounded. I could not believe that Lord Methuen was really
wounded. The following morning I felt a great wish to pay a visit to
the laager. I had my horses harnessed and started. I had to drive a
good way—it seemed to me for nearly four hours—and although I
had wanted to go back the same day to my waggons, I found it
would be too late to do so. I arrived at the laager in the afternoon,
and there I found an enormous crowd of men and animals. I asked
my husband if really Lord Methuen were here. “Yes,” he answered,
“it is the man who sent you out of Lichtenburg.” “Then I shall go and
see him,” I said. I went with my daughter, and we found him,
quartered with a few tents and waggons, a little distance from the
laager. When I got there, one of our people, a man called Tom, said
that he did not want to see any visitors. Yes, that I could well
understand, that it was not pleasant for him to see the Boers. All the
same, when he heard that I was there, he said that I might come in—
that he would like to see me. I went into his tent; there lay the great,
strong man wounded above the knee, right through the bone. When I
had come in he begged me to forgive him for all the annoyance he
had caused me, and he asked if I had suffered much discomfort from
all that running away. “No,” I said, “it all went much better than I had
expected. I did not even have to do my best to escape from falling
into your hands.”
“Oh,” said he, “I have done my best to catch you.” And so we
“chaffed” each other. As it was a difficult position for both of us, I
asked him if his leg were hurting him very much. He said, “No, not
very much.”
“Then it won’t be a good thing for us,” I said, “if your leg gets cured
so quickly, then you will come and shoot at us again.”
He laughed and said, “No, I am going away, and I will not shoot at
you any more.”
Then he told me all about Lichtenburg, and how things were going
there, and he said that my houses were still unharmed.
I said, “But my dwelling-house has been destroyed.”
“Oh, yes,” he said, “that had to be broken down. General De la
Rey might have been coming to it some fine morning and firing at me
out of it. That was why it had to be broken down.”
Then he told me how glad he was to be able to go back to
Klerksdorp, and he asked me to let the telegram to his wife be sent
off as quickly as possible.
Then, as I also wanted to send a telegram to my children in
Pretoria, I told him that he must take good care of it and forward it,
so that they too should be sure to get it. Yes, he said, he would not
fail to do so. And he was true to his word; for when I met my children
later they said they had received it.
Then it grew late and it was time to return. I wished him a speedy
recovery. When I came to the laager they gave me one of the
waggons which they had taken from the enemy to sleep in. It was
late and I had to see to our dinner. But everything seemed in such a
muddle among all these menfolk; I did not know where to lay my
hand upon what I wanted.

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2) For an expense to be ordinary, it must be customary or usual in the taxpayer's particular

3) For an expense to be necessary, it must be essential to the taxpayer's business.

11) The §179 expense deduction is limited to earned income.

12) "Listed property" includes only passenger automobiles.

19) Meals and entertainment expenses are limited to 50%.

26) Which expenses incurred in a trade or business are deductible?

Gambling winnings $ 275,000

30) Trade or business expenses are treated as:

42) Under MACRS, 5-year property includes:

44) Which of the following is incorrect regarding luxury automobile limitations?

Home to Midnight Motel 4 miles

Mortgage interest $ 12,400

Net Income Carryover

52) If an activity is considered a hobby, which of the following is true?

56) What form is filed to report the self-employment tax?

Rate Income Limit

W-2 wages from employer $ 28,000

a. What income or loss should be reported on Schedule C?

Jewelry Sales $ 15,000

What is Bart's self-employment income?

Total Income $ 102,480

Answer: An expense should be ordinary, necessary, and reasonable. For an expense to be

b. 2017- $80,000 × 50% = $40,000 first year + ($40,000 × 14.29%) = $45,716.

Section 179 $ 300,000

Answer: Year of purchase: $3,000,000 × .01819 = $54,570.

Year of sale: $3,000,000 × .02564 × 7.5/12 = $48,075.

179 Deduction $ 510,000

Explanation: Section 179 is limited to $510,000 in 2017.

Asset Date of Acquisition Cost

Cost recovery for 2017 is $700 [$5,000 × .20 × .70].

Standard mileage rate (10,000 × 53.5 cents /mile) 5,350

Calculate Terry's travel expense deduction.

Answer: Terry's travel expense deduction is calculated as follows:

Calculate Bob's travel expense deduction.

Air fare ($1,400 × 50%) $ 700

Adjusted Basis FMV Before FMV After Insurance Proceeds

Barn ($30,000 - $50,000) = $ (20,000 )

Answer: Alice's income and expenses would be reported as follows:

Income (other income, Form 1040) $ 6,000

Answer: Beau's self-employment tax for 2017 is calculated as follows:

Soc sec. ceiling amount $ 127,200

“Whither, pilgrim—whither art thou flying?

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