Question 1

Costs associated with commuting to and from a business location is a deductible expense.

Accepted Answer

A) True 
 B)False

Question 2

Hunter retired last year and will receive annuity payments for life from his employer's qualified retirement plan of $30,000 per year starting this year.During his years of employment,Hunter contributed $130,000 to the plan on a pre-tax basis.Based on IRS tables,his life expectancy is 260 months.All of the contributions were on a pre-tax basis.This year,Hunter will include what amount in income?

Accepted Answer

A) $0 
B) $6,000 
C) $24,000 
D) $30,000 
A) $0 
B) $6,000 
C) $24,000 
D) $30,000

Question 3

During 2019,Marcia,who is single and is covered under a pension plan at work,contributes $6,000 into a Roth IRA.If her AGI is $68,000,which of the following is true?

Accepted Answer

A) All of the contribution is deductible. 
B) None of the contribution is deductible. 
C) She must withdraw all of the contribution immediately since she is covered under a plan at work. 
D) Only 60% of the contribution is deductible since her AGI exceeds $64,000 by $4,000 and her maximum contribution is phased out by 40%. 
A) All of the contribution is deductible. 
B) None of the contribution is deductible. 
C) She must withdraw all of the contribution immediately since she is covered under a plan at work. 
D) Only 60% of the contribution is deductible since her AGI exceeds $64,000 by $4,000 and her maximum contribution is phased out by 40%.

Question 4

SIMPLE retirement plans allow a higher level of employer contributions than do SEP IRAs.

Accepted Answer

A) True 
 B)False

Question 5

Under a qualified pension plan,the employer's deduction is usually deferred until the employee recognizes income.

Accepted Answer

A) True 
 B)False

Question 6

Tyler (age 50)and Connie (age 48)are a married couple.Tyler is covered under a qualified retirement plan at his job and earned $175,000 in 2019.Connie is employed as a lab technician and earned $35,000 but is not covered under a qualified retirement plan.They file a joint return; have interest and dividend income of $30,000.What is their maximum for AGI deduction for contributions to a traditional IRA?

Accepted Answer

A) $0 
B) $6,000 
C) $7,000 
D) $13,000 
A) $0 
B) $6,000 
C) $7,000 
D) $13,000

Question 7

Joe is a self-employed tax attorney who frequently entertains his clients at his country club.Joe's club expenses include the following: $$\begin{array} { | l | r | } 
\hline \text { Annual dues } & \$ 5,400 \
\hline \text { Golfing fees with clients } & 1,200 \
\hline \text { Charges for personal meals with his family } & 3,100 \
\hline \text { Meal charges related to hosting meetings with clients } & 4,000 \
\hline
\end{array}$$ Assuming proper documentation is maintained,Joe may deduct

Accepted Answer

A) $2,000. 
B) $2,600. 
C) $5,300. 
D) $4,000. 
A) $2,000. 
B) $2,600. 
C) $5,300. 
D) $4,000.

Question 8

Tessa is a self-employed CPA whose 2019 net earnings from her business (before the H.R.10 plan contribution but after the deduction for one-half of self-employment taxes)is $400,000.What is the maximum contribution that Tessa can make on her behalf to her H.R.10 (Keogh)plan in 2019?

Accepted Answer

A) $100,000 
B) $80,000 
C) $70,000 
D) $56,000 
A) $100,000 
B) $80,000 
C) $70,000 
D) $56,000

Question 9

Sam retired last year and will receive annuity payments for life from his employer's qualified retirement plan of $30,000 per year starting this year.During his years of employment,Sam contributed $130,000 to the plan on an after-tax basis.Based on IRS tables,his life expectancy is 260 months.This year,Sam will include what amount in income?

Accepted Answer

A) 0 
B) $6,000 
C) $24,000 
D) $30,000 
A) 0 
B) $6,000 
C) $24,000 
D) $30,000

Question 10

In determining whether a taxpayer is considered to be in travel status for tax purposes,a general rule is that if a person is reassigned for an indefinite period,the individual's tax home shifts to the new location and the taxpayer is not considered to be in travel status.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements regarding independent contractors and employees is true?

Accepted Answer

A) Independent contractors pay Social Security and Medicare tax of 15.3%. 
B) Employees must pay unemployment taxes. 
C) Independent contractors and employees pay the same Social Security and Medicare tax rates. 
D) Independent contractors deduct their business expenses "from AGI." 
A) Independent contractors pay Social Security and Medicare tax of 15.3%. 
B) Employees must pay unemployment taxes. 
C) Independent contractors and employees pay the same Social Security and Medicare tax rates. 
D) Independent contractors deduct their business expenses "from AGI."

Question 12

Which statement is correct regarding SIMPLE retirement plans?

Accepted Answer

A) SIMPLE plans are not subject to nondiscrimination rules. 
B) This plan can only be adopted by employers with 50 or fewer employees. 
C) Only the employer can contribute to the plan. 
D) Employer contributions must vest within three years. 
A) SIMPLE plans are not subject to nondiscrimination rules. 
B) This plan can only be adopted by employers with 50 or fewer employees. 
C) Only the employer can contribute to the plan. 
D) Employer contributions must vest within three years.

Question 13

Jackson Corporation granted an incentive stock option to employee Caroline on January 1,two years ago.The option price was $150,and the FMV of the Jackson stock was also $150 on the grant date.The option allowed Caroline to purchase 160 shares of Jackson stock.Caroline exercised the option on August 1,2018,when the stock's FMV was $250.Unless otherwise stated,assume Caroline is a qualifying employee.If Caroline sells the stock on July 5,2019,for $400 per share,she must recognize

Accepted Answer

A) long-term capital gain of $40,000 in the year of sale. 
B) long-term capital gain of $24,000 in the year of sale. 
C) ordinary income of $16,000 on the exercise date and a long-term capital gain of $24,000 in the year of sale. 
D) ordinary income of $16,000 and a short-term capital gain of $24,000 in the year of sale. 
A) long-term capital gain of $40,000 in the year of sale. 
B) long-term capital gain of $24,000 in the year of sale. 
C) ordinary income of $16,000 on the exercise date and a long-term capital gain of $24,000 in the year of sale. 
D) ordinary income of $16,000 and a short-term capital gain of $24,000 in the year of sale.

Question 14

Fin is a self-employed tutor,regularly meeting with clients in a 100 square foot area of his home.Fin is terrible at keeping records.Without the records,he will be able to deduct $500 for a home office deduction for AGI.

Accepted Answer

A) True 
 B)False

Question 15

In-home office expenses for an office used by the taxpayer for administrative or management activities of the taxpayer's trade or business are never deductible.

Accepted Answer

A) True 
 B)False

Question 16

Educational expenses incurred by a self-employed CPA for courses necessary to meet continuing education requirements are fully deductible.

Accepted Answer

A) True 
 B)False

Question 17

An employee travels out of town on company business.She is fully reimbursed from her employer under an accountable plan.The employee can exclude the reimbursement from income.

Accepted Answer

A) True 
 B)False

Question 18

A self-employed consultant takes a client to a major league football game to propose a new consulting engagement.Assuming appropriate documentation is maintained,the individual will receive a deduction for AGI for 50% of the ticket cost.

Accepted Answer

A) True 
 B)False

Question 19

A sole proprietor establishes a Keogh plan.The highest effective percentage of earned income she can contribute is 25 percent.

Accepted Answer

A) True 
 B)False

Question 20

Norman,a self-employed lawyer,traveled to San Francisco for four days on vacation,and while there spent another two days conducting business.Norman's plane fare for the trip was $500; meals cost $150 per day; hotels cost $300 per day; and a rental car cost $150 per day that was used for all six days.Norman may deduct

Accepted Answer

A) $1,050. 
B) $0. 
C) $1,217. 
D) $1,200. 
A) $1,050. 
B) $0. 
C) $1,217. 
D) $1,200.

Exam 23: Business Expenses and Deferred Compensation

Costs associated with commuting to and from a business location is a deductible expense.

During 2019,Marcia,who is single and is covered under a pension plan at work,contributes $6,000 into a Roth IRA.If her AGI is $68,000,which of the following is true?

SIMPLE retirement plans allow a higher level of employer contributions than do SEP IRAs.

Under a qualified pension plan,the employer's deduction is usually deferred until the employee recognizes income.

Tessa is a self-employed CPA whose 2019 net earnings from her business (before the H.R.10 plan contribution but after the deduction for one-half of self-employment taxes)is $400,000.What is the maximum contribution that Tessa can make on her behalf to her H.R.10 (Keogh)plan in 2019?

In determining whether a taxpayer is considered to be in travel status for tax purposes,a general rule is that if a person is reassigned for an indefinite period,the individual's tax home shifts to the new location and the taxpayer is not considered to be in travel status.

Which of the following statements regarding independent contractors and employees is true?

Which statement is correct regarding SIMPLE retirement plans?

Fin is a self-employed tutor,regularly meeting with clients in a 100 square foot area of his home.Fin is terrible at keeping records.Without the records,he will be able to deduct $500 for a home office deduction for AGI.

In-home office expenses for an office used by the taxpayer for administrative or management activities of the taxpayer's trade or business are never deductible.

Educational expenses incurred by a self-employed CPA for courses necessary to meet continuing education requirements are fully deductible.

An employee travels out of town on company business.She is fully reimbursed from her employer under an accountable plan.The employee can exclude the reimbursement from income.

A self-employed consultant takes a client to a major league football game to propose a new consulting engagement.Assuming appropriate documentation is maintained,the individual will receive a deduction for AGI for 50% of the ticket cost.

A sole proprietor establishes a Keogh plan.The highest effective percentage of earned income she can contribute is 25 percent.

Tax Research

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Property Transactions: Nontaxable Exchanges

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Special Tax Computation Methods,tax Credits,and Payment of Tax

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