Question 1

If the standard mileage rate is used in the first year,the actual expense method may not be used in future years.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following situations will disqualify a taxpayer from taking a deduction for moving expenses?

Accepted Answer

A) Pam moves from Phoenix to Los Angeles to take a new job.She works at the Los Angeles job for 45 weeks before starting a new job in Las Vegas. 
B) Paul moves from Boston to Miami to start a new business selling t-shirts.The business is not successful and Paul returns to Boston after 52 weeks. 
C) Phyllis moves from Seattle to San Francisco to open a coffee bar.She still owns the coffee bar and lives in San Francisco 90 weeks after her move. 
D) Marva moves from Dallas to Washington,DC,in her job as an IRS agent.She is still working at the IRS Washington office after one year. 
A) Pam moves from Phoenix to Los Angeles to take a new job.She works at the Los Angeles job for 45 weeks before starting a new job in Las Vegas. 
B) Paul moves from Boston to Miami to start a new business selling t-shirts.The business is not successful and Paul returns to Boston after 52 weeks. 
C) Phyllis moves from Seattle to San Francisco to open a coffee bar.She still owns the coffee bar and lives in San Francisco 90 weeks after her move. 
D) Marva moves from Dallas to Washington,DC,in her job as an IRS agent.She is still working at the IRS Washington office after one year.

Question 3

A nondeductible floor of 2% of AGI is imposed on unreimbursed employee business expenses,investment expenses,and many other miscellaneous itemized deductions such as tax preparation fees.

Accepted Answer

A) True 
 B)False

Question 4

In a defined contribution pension plan,fixed amounts are contributed based upon a specific formula and retirement benefits are based on the value of a participant's account at the time of retirement.

Accepted Answer

A) True 
 B)False

Question 5

Frank is a self-employed CPA whose 2017 net earnings from his trade or business (before the H.R.10 plan contribution but after the deduction for one-half of self-employment taxes)is $240,000.What is the maximum contribution that Frank can make on his behalf to his H.R.10 (Keogh)plan in 2017?

Accepted Answer

A) $67,500 
B) $48,000 
C) $54,000 
D) $60,000 
A) $67,500 
B) $48,000 
C) $54,000 
D) $60,000

Question 6

If an employee incurs travel expenditures and is fully reimbursed by the employer,neither the reimbursement nor the deduction is reported on the employee's tax return if reporting is pursuant to an accountable plan.

Accepted Answer

A) True 
 B)False

Question 7

H (age 50)and W (age 48)are married but only W is employed.She is not covered by a retirement plan at work.She earns $75,000 during the year and they have combined AGI of $78,000 before any IRA contribution.In 2017,the maximum amount together they may contribute to tax deductible IRAs is

Accepted Answer

A) $5,500. 
B) $6,500. 
C) $11,000. 
D) $12,000. 
A) $5,500. 
B) $6,500. 
C) $11,000. 
D) $12,000.

Question 8

Joe is a self-employed tax attorney who frequently entertains his clients at his country club.Joe's club expenses include the following:   Assuming the business meals and entertainment qualify as deductible entertainment expenses,Joe may deduct

Accepted Answer

A) $2,000. 
B) $4,700. 
C) $5,300. 
D) $4,000. 
A) $2,000. 
B) $4,700. 
C) $5,300. 
D) $4,000.

Question 9

All of the following statements regarding tax treatment of education expenses are true except

Accepted Answer

A) Fred,who recently graduated law school,is working in a law firm.The firm requires that he pass the bar exam by a certain date,or he will lose his job.Fred can deduct his cost for the bar exam review course as a miscellaneous itemized deduction (subject to the 2% nondeductible floor). 
B) Sophie is a partner in a CPA firm.She pays out of her own funds to attend an update course on estate and gift tax planning.Sophie can deduct the cost of the course for AGI. 
C) Javier is an associate in a CPA firm.He pays out of his own funds to attend an update course on new FASB standards.Javier can deduct his cost for the course as a miscellaneous itemized deduction (subject to the 2% nondeductible floor). 
D) Iris is an associate in a law firm.She attends an update course on contract drafting,and she is reimbursed by the law firm.There is no effect on Iris' tax return. 
A) Fred,who recently graduated law school,is working in a law firm.The firm requires that he pass the bar exam by a certain date,or he will lose his job.Fred can deduct his cost for the bar exam review course as a miscellaneous itemized deduction (subject to the 2% nondeductible floor). 
B) Sophie is a partner in a CPA firm.She pays out of her own funds to attend an update course on estate and gift tax planning.Sophie can deduct the cost of the course for AGI. 
C) Javier is an associate in a CPA firm.He pays out of his own funds to attend an update course on new FASB standards.Javier can deduct his cost for the course as a miscellaneous itemized deduction (subject to the 2% nondeductible floor). 
D) Iris is an associate in a law firm.She attends an update course on contract drafting,and she is reimbursed by the law firm.There is no effect on Iris' tax return.

Question 10

What factors are considered in determining whether an expense is a deductible travel expense?

Accepted Answer

Factors to consider include:
1.Whether t

Question 11

An employee travels out of town for his job,and he is not reimbursed.The deduction for his travel costs are a deduction from AGI subject to the 2% floor.

Accepted Answer

A) True 
 B)False

Question 12

The maximum tax deductible contribution to a Roth IRA in 2017 is $5,500 ($6,500 for a taxpayer age 50 or over).

Accepted Answer

A) True 
 B)False

Question 13

A taxpayer moves for employment in November 2017 and pays all of the moving expenses by December 31.Because he cannot satisfy the 39-week employment test,he cannot claim the moving expense deduction until the following year.

Accepted Answer

A) True 
 B)False

Question 14

West's adjusted gross income was $90,000.During the current year he incurred and paid the following:   None of the expenses were reimbursed.Assuming he can itemize deductions,how much should West claim as miscellaneous itemized deductions (after limitations have been applied)?

Accepted Answer

A) $2,700 
B) $4,500 
C) $3,500 
D) $5,300 
A) $2,700 
B) $4,500 
C) $3,500 
D) $5,300

Question 15

Tia is a 52-year-old,unmarried taxpayer who is an active participant in an employer-sponsored qualified retirement plan.Before IRA contributions,her AGI is $66,000 in 2017.
a.What is the maximum amount she can contribute and the maximum deduction she can receive for a contribution to a traditional IRA?
b.What is the maximum amount she can contribute and the maximum deduction she can receive for a contribution to a Roth IRA?

Accepted Answer

a.Tia is allowed to contribute up to $6,

Question 16

If an individual is self-employed,business-related expenses are deductions for AGI.

Accepted Answer

A) True 
 B)False

Question 17

"Associated with" entertainment expenditures generally must occur on the same day that business is discussed.

Accepted Answer

A) True 
 B)False

Question 18

Raul and Jenna are married and are both working.They are both over age 50.Jenna participates in her employer's Sec.401(k)plan and makes the maximum contribution and enjoys a company matching contribution.Raul's employer does not maintain a retirement plan so he would like to save as much as possible in a tax-advantaged manner for retirement.They expect to report $190,000 of AGI for 2017.
a.What is the maximum amount that Raul can contribute to a traditional IRA and how much can he deduct?
b.What is the maximum amount that Raul can contribute to a Roth IRA and how much can he deduct?
c.How could Raul contribute to both the traditional IRA and Roth IRA to maximize current and future tax savings?

Accepted Answer

a.Raul can contribute $6,500 to a tradit

Question 19

Which of the following statements is incorrect regarding unfunded deferred compensation plans?

Accepted Answer

A) The employee is not taxed on the compensation amount when it is deposited in an escrow account. 
B) An accrual-basis employer can deduct the compensation amount when it is accrued in the year of service. 
C) An employee is taxed when the amount is actually paid or made available. 
D) A 20% excise tax will apply if the employee can voluntarily elect to receive payment early. 
A) The employee is not taxed on the compensation amount when it is deposited in an escrow account. 
B) An accrual-basis employer can deduct the compensation amount when it is accrued in the year of service. 
C) An employee is taxed when the amount is actually paid or made available. 
D) A 20% excise tax will apply if the employee can voluntarily elect to receive payment early.

Question 20

In-home office expenses which are not deductible in the year in which the costs were incurred due to income limitations may be carried forward to subsequent years.

Accepted Answer

A) True 
 B)False

Exam 25: Employee Expenses and Deferred Compensation

If the standard mileage rate is used in the first year,the actual expense method may not be used in future years.

Which of the following situations will disqualify a taxpayer from taking a deduction for moving expenses?

A nondeductible floor of 2% of AGI is imposed on unreimbursed employee business expenses,investment expenses,and many other miscellaneous itemized deductions such as tax preparation fees.

In a defined contribution pension plan,fixed amounts are contributed based upon a specific formula and retirement benefits are based on the value of a participant's account at the time of retirement.

Frank is a self-employed CPA whose 2017 net earnings from his trade or business (before the H.R.10 plan contribution but after the deduction for one-half of self-employment taxes)is $240,000.What is the maximum contribution that Frank can make on his behalf to his H.R.10 (Keogh)plan in 2017?

If an employee incurs travel expenditures and is fully reimbursed by the employer,neither the reimbursement nor the deduction is reported on the employee's tax return if reporting is pursuant to an accountable plan.

H (age 50)and W (age 48)are married but only W is employed.She is not covered by a retirement plan at work.She earns $75,000 during the year and they have combined AGI of $78,000 before any IRA contribution.In 2017,the maximum amount together they may contribute to tax deductible IRAs is

Joe is a self-employed tax attorney who frequently entertains his clients at his country club.Joe's club expenses include the following: Assuming the business meals and entertainment qualify as deductible entertainment expenses,Joe may deduct

All of the following statements regarding tax treatment of education expenses are true except

What factors are considered in determining whether an expense is a deductible travel expense?

An employee travels out of town for his job,and he is not reimbursed.The deduction for his travel costs are a deduction from AGI subject to the 2% floor.

The maximum tax deductible contribution to a Roth IRA in 2017 is $5,500 ($6,500 for a taxpayer age 50 or over).

A taxpayer moves for employment in November 2017 and pays all of the moving expenses by December 31.Because he cannot satisfy the 39-week employment test,he cannot claim the moving expense deduction until the following year.

West's adjusted gross income was $90,000.During the current year he incurred and paid the following: None of the expenses were reimbursed.Assuming he can itemize deductions,how much should West claim as miscellaneous itemized deductions (after limitations have been applied)?

If an individual is self-employed,business-related expenses are deductions for AGI.

"Associated with" entertainment expenditures generally must occur on the same day that business is discussed.

Which of the following statements is incorrect regarding unfunded deferred compensation plans?

In-home office expenses which are not deductible in the year in which the costs were incurred due to income limitations may be carried forward to subsequent years.

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