4. Jill is paid royalty income from the publisher of a book she wrote two years ago. She shouldreport this

income on

Schedule B

Schedule C

Schedule D

Schedule E

5. Nan, a cash basis taxpayer, borrowed money from a bank and signed a 10-year interestbearing

note on business property on January 1 of the current year. The cash flow from Nan’s

business enabled Nan to prepay the first three years of interest attributable to the note on

December 31 of the current year. How should Nan treat the prepayment of interest for tax

purposes?

Deduct the entire amount as a current expense.

Capitalize the interest and amortize the balance over the 10-year load period.

Capitalize the interest as part of the basis of the business property.

Deduct the current year’s interest and amortize the balance over the next two years.

6. A taxpayer purchased and placed into service a $690,000 piece of equipment in a year with

a maximum allowable section 179 amount of $500,000 and a ceiling of $2,000,000 of qualifying

property. The equipment is 7-year property. The first-year depreciation for 7-year property is

14.29%. Before considering any depreciation deduction, the taxpayer had $700,000 of taxable

income. The taxpayer elected out of any bonus depreciation. What amount is the maximum

allowable depreciation deduction?

$527,151

$98,601

$690,000

$500,000

Jill is paid royalty income from the publisher of a book she wrote two years ago. She should report this income on Schedule B Schedule C Schedule D