P2-U04 · PART 2 · SOURCE CYCLE 2026-2027
Business Expenses
How to complete this unit
This unit uses 22 source-gated recall cards and 23 admissible practice questions. Complete the sequence in order; the unreleased wiki prose remains outside the learner path.
- 1 · LearnBuild the rule
Answer each recall prompt before opening it. Then learn the exact rule, test the controlling facts through four quick challenges, explore common questions, and finish with one own-words teach-back.
- 2 · ApplyUse it in context
Complete at least 20 mapped questions over two sessions. Review the explanation even when the answer is correct.
- 3 · ProveTest readiness
Use the Part 2 mock under time pressure. Return here for every flagged or missed concept before the next attempt.
Verified recall questions
Only cards whose complete question and answer were checked against exact primary-authority evidence appear here. Stable unit ownership gathers this lesson across 1 textbook collection.
Q1.Alder is evaluating a trade-or-business cost. What threshold must it meet to be deductible?
It must be ordinary and necessary
Q2.Alder is present at an ordinary business meal that is not lavish or extravagant. What percentage is generally deductible?
50%
Q3.Which travel costs fall within the federal tax definition of business travel expenses?
Ordinary and necessary costs of traveling away from home for a business, profession, or job
Q4.What standard mileage rate applies to business use of a car for 2025?
70 cents per mile
Q5.What is the general deduction rule for premiums on qualifying insurance related to a business?
The premiums are generally deductible
Q6.What happens to the home-office exclusive-use test when the same area is used for both business and personal purposes?
The area generally fails the exclusive-use test
Q7.What records must a business traveler retain for away-from-home travel?
Records of all travel expenses and employer advances received
Q8.For a business expense to be deductible, it must be both:
“Ordinary” and “necessary.”
Q9.In order for a business to deduct meal expenses, which of the following is correct?
The meal is an ordinary and necessary business expense.
Q10.Discount Dollar, Inc. is a discount chain of retailers located in Washington. The business pays a combined 8.25% sales tax to local and state taxing authorities when a customer purchases its merchandise. Washington imposes sales tax on the buyer of the goods. How should Discount Dollar treat the sales tax it collects from its customers?
Exclude from its gross receipts and deductible expenses the sales taxes it collects and remits them to local and state taxing authorities.
Q11.Which of the following expenses is generally 50% deductible for a business in 2025?
Snacks provided to employees in the breakroom
Q12.In 2025, Etsuko, a self-employed realtor, traveled to a business convention by ferry and incurred the following expenses: • Convention entrance fee: $200 - Ferry ticket: $100 • Meals at a restaurant: $80 • Hotel room: $90 • Computer game purchased during the convention: $50 How much is deductible as a current business expense on her Schedule C?
$430
Q13.Which of the following costs qualify as business start-up costs?
A survey of potential markets.
Q14.On February 1, 2025, Landon rented a storage unit to store equipment and supplies for his landscaping business. Landon is offered a discount if he pays 36 months of the lease upfront, which is $2,520 for a three-year lease. What is the allowable deduction for leasing the storage unit on his Schedule C in 2025?
$770
Q15.Davina is a sole proprietor who owns a public relations business. She has a nine-year-old son she claims as a dependent. In 2025, she paid $7,400 for health insurance premiums for herself and her son, who is her dependent. She reported a net profit of $43,000 on her Schedule C for the year. Which of the following statements is correct?
She can deduct 100% of the health insurance premiums as an adjustment to income.
Q16.Darnell is a self-employed realtor who reports his income and loss on Schedule C. He pays his own health insurance premiums. Which of the following would limit the deduction for health insurance premiums?
His deduction is limited to the net profit from his business.
Q17.A company organizes a business trip for its employees. Which of the following expenses is fully deductible as a business expense?
Hotel accommodation for the employees
Q18.Darren is a self-employed plumber who files a Schedule C. In 2025, he pays the following fines and penalties. Which of these are deductible as a business expense?
Penalties paid for breaking a maintenance contract after one of his clients took him to court.
Q19.Gabriella has a home office she uses exclusively for her transcriptionist business. The office measures 30 × 15, or 450 square feet. She wants to use the simplified home office method. She does not own her home; she rents from a landlord. What is the maximum she can deduct on her Schedule C if she uses the simplified method?
$1,500
Q20.Quentin requested a $100,000 business loan to purchase a machine for his business. The machine cost $90,000. The rest of the money went into Quentin's bank account, and he purchased a jet ski with the money later in the year. However, the entire loan was secured by his business assets. Which of the following statements is correct?
Only the amount of interest allocable to the purchase of the business machine is deductible.
Q21.Garrett operates his printing business out of a rented business office. He does not have a home office. He uses his own truck to deliver completed print jobs to his customers. Which of the following statements is correct?
Garrett can deduct the cost of round-trip transportation between customers and his shop.
Q22.Savannah is a self-employed tax preparer who reports income and loss on Schedule C. She goes to a continuing education seminar out-of-state and incurs the following expenses: Tax seminar: $400 Train ticket: $35 Restaurant meal expense: $20 Taxi fare to the restaurant: $13 Movie ticket after the webinar: $9 What is her deductible expense for this event?
$458
Ready to move on?
- ▸ Explain at least 80% of these 22 rules without opening the answer, twice on different days.
- ▸ Score 80% across 20 or more mapped questions over two sessions, not one memorized round.
- ▸ Complete a timed Part 2 mock and return to this unit if its concepts remain flagged or missed.
Use these checks to choose your next study action. They do not predict a PSI scaled score.