Exam 25: Employee Expenses and Deferred Compensation

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

Gwen traveled to New York City on a business trip for her employer.Gwen spent 4 days in business meetings and conferences and then spent 2 days sightseeing in the area.Gwen's plane fare for the trip was $250.Meals cost $160 per day.Hotels and other incidental expenses amounted to $250 per day.Gwen was not reimbursed by her employer for any expenses.Her AGI for the year is $50,000 and she itemizes but has no other miscellaneous itemized deductions.Gwen may deduct (after limitations)

Why did Congress establish Health Savings Accounts (HSAs)? How do HSAs operate?

Which of the following statements is incorrect regarding the SEP IRA?

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.

Unreimbursed employee business expenses are deductions for AGI.

In a contributory defined contribution pension plan,all of the following are true with the exception of

Rui,a CPA,is employed by a firm with offices downtown.She is assigned to an audit client in the suburbs for a few weeks.On most days,she drives straight to the client's location,works there all day,and then drives home at night.Rui's transportation costs driving between home and the client's location are deductible as unreimbursed employee business expenses.

Dighi,an artist,uses a room in his home (250 square feet)as a studio exclusively to paint.The studio meets the requirements for a home office deduction.(Painting is considered his trade or business. )The following information appears in Dighi's records: (a)What is the amount of Dighi's home office deduction if he is self-employed? (b)If some amount is not allowed under the tax law,how is the disallowed amount treated? (c)Assume all of Dighi's records of expenses relating to the room were destroyed in a major paint spill.How much of a home office deduction,if any,will he be allowed?

Ross works for Houston Corporation,which has a contributory defined contribution pension plan.The employer's monthly contribution to the plan is 8 percent of each participating employee's monthly salary,while the employee contributes only 6 percent.Which of the following statements best describes the benefits of the plan?

When a public school system requires advanced education for a teacher to continue employment,the teacher's expenses are a deductible education expense.

Angie starts a new job and becomes covered under the employer's health insurance plan which has an annual deductible of $2,400.Angie contributes the maximum amount into a Health Savings Account.Which of the following statements regarding Angie's Health Savings Account is correct?

Employees receiving nonqualified stock options recognize ordinary income at the grant date or exercise date if there is a readily ascertainable fair market value.

There are several different types of qualified retirement plans.One common criteria across qualified retirement plans is that employers deduct the contributions and employees include the contributions in taxable income in the same period.

In which of the following situations is the individual more likely to be classified as an independent contractor rather than an employee?

An employer contributing to a qualified retirement plan will be allowed a deduction when the employee recognizes the income at retirement or separation from service.

At her employer's request,Kim moves from Albany to Chicago.She incurs $20,000 of costs to move her household goods and to travel to the new location,plus $8,000 of temporary living expenses because the new home was not ready when she needed to start work.Her employer reimburses her the full $28,000 cost associated with the move.She cannot deduct the moving costs,but she is not economically impacted because she is fully reimbursed.

David acquired an automobile for $30,000 for use in his unincorporated business at the beginning of 2017 and used the standard mileage rate method in 2017.He plans to switch to the actual expense method for 2018.The automobile was used 25,000 miles in 2017.What is the amount of the adjusted basis of the automobile for purposes of computing depreciation in 2018?

What two conditions are necessary for moving expenses to be deductible?

A qualified pension plan requires that employer-provided benefits must be 100 percent vested after five years of service.