Exam 9: Deductions Employee and Self Employed Related Expenses

Allowing for the cutback adjustment (50% reduction for meals and entertainment),which of the following trips,if any,will qualify for the travel expense deduction?

Paul is employed as an auditor by a CPA firm.On most days,he commutes by auto from his home to the office.During one month,however,he has an extensive audit assignment closer to home.For this engagement,Paul drives directly from home to the client's premises and back.Mileage information is summarized below: Home to office 12 miles Office to audit client 15 miles Audit client to home 10 miles If Paul spends 20 days on the audit,what is his deductible mileage?

Regarding the new simplified method of computing the office in the home deduction,comment on the following independent factors. a.Taxpayer has set aside 400 square feet for use as an office. b.Taxpayer has repainted and recarpeted the office area. c.In past years,taxpayer has always taken the deduction using the regular (actual expense)method. d.The net income from the business is not large.

The § 222 deduction for tuition and related expenses is available:

The tax law specifically provides that a taxpayer cannot be temporarily away from home for any period of employment that exceeds one year.

Meg teaches the fifth grade at a local school.During the year,she spends $1,200 for school supplies for use in her classroom.On her income tax return,some of this expense is not reported and the balance is deducted in two different places.Explain what has probably happened.

In terms of income tax treatment,what is the difference between common law and statutory employees?

For the current football season,Tern Corporation pays $40,000 for a skybox (containing 12 seats)at Veterans Stadium for eight home games.Regular nonskybox seats at each game range from $120 to $150 a seat.In November,a Tern employee and ten clients use the skybox to attend a game.The event is preceded by a bona fide business discussion,and Tern spent $1,000 for food and drinks during the game.What is Tern's deduction?

At age 65,Camilla retires from her job in Boston and moves to Florida.As a retiree,she is not subject to the time test in deducting her moving expenses.

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. a.Indicates employee status. b.Indicates independent contractor status. -Sue was trained by Lynn.

After graduating from college,Clint obtained employment in Omaha.In moving from his parents' home in Baltimore to Omaha,Clint incurred the following expenses: Transportation $ 700 Meals 380 Lodging 400 Cost of moving household goods 3,500 ​ a.How much may Clint deduct as moving expense? b.Would any deduction be allowed if Clint claimed the standard deduction for the year of the move? Explain.

Which,if any,of the following is an advantage of using the simplified method for determining the office in the home deduction?

Rocky has a full-time job as an electrical engineer for the city utility.In his spare time,Rocky repairs TV sets in the basement of his personal residence.Most of his business comes from friends and referrals from former customers,although occasionally he runs an ad in the local suburbia newspaper.Typically,the sets are dropped off at Rocky's house and later picked up by the owner when notified that the repairs have been made. The floor space of Rocky's residence is 2,500 square feet,and he estimates that 20% of this is devoted exclusively to the repair business (i.e. ,500 square feet).Gross income from the business is $13,000,while expenses (other than home office)are $5,000.Expenses relating to the residence are as follows: Real property taxes $4,500 Interest on home mortgage 8,000 Operating expenses of residence 3,000 Depreciation (based on 20% business use) 1,000 What is Rocky's net income from the repair business ​ a.If he uses the regular (actual expense)method of computing the deduction for office in the home? b.If he uses the simplified method?

Match the statements that relate to each other.(Note: Choice L may be used more than once. ) a.Cover charge paid to entertain client at a night club. b.Deductible even if taxpayer does not take the new job c.Company picnic sponsored by employer d.Use of Federal per diem allowance to substantiate meals while in travel status e.Does not have to be job related f.Can include cost of car insurance and automobile club dues g.Distribution from plan is taxable h.Distribution from plan is not taxable i.Expatriate (U.S.person who is employed overseas)returns home to retire j.Taxpayer moves to a new residence 55 miles closer to his present job k.Country club membership fee l.Correct match not provided -Roth IRAs

Match the statements that relate to each other.(Note: Choice L may be used more than once. a.Must involve the same trade or business b.Must be for the convenience of the employer c.Meals while in route d.Lodging while in route e.Out-of-town job assignment lasts for more than one year f.Can include actual cost of parking g.Payment for services rendered based on tasks performed h.Excludes use of MACRS depreciation i.Taxpayer has tools and helper provided for him j.Transportation must be allocated if taxpayer spends two weeks on business and one week sightseeing k.Paralegal obtains a law degree l.Correct match not provided -Deductible job-hunting expenses

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. a.Indicates employee status. b.Indicates independent contractor status. -Sue uses her own helpers.

Eileen lives and works in Mobile.She travels to Rome for an eight-day business meeting,after which she spends two days touring Italy.All of Eileen's airfare is deductible.

Regarding tax favored retirement plans for employees and self-employed persons,comment on the following: a.The exclusion versus deduction approaches as to contributions by participants. b.Tax-free accumulation of earnings. c.The deferral of income tax consequences. d.Employee versus self-employed status.

Discuss the 2%-of-AGI floor and the 50% cutback limitation in connection with various employee expenses under the following arrangements: a.The employee is not reimbursed by the employer. b.The employee is fully reimbursed under a nonaccountable plan. c.The employee is partially reimbursed under an accountable plan. d.The employee is fully reimbursed under an accountable plan.

Which,if any,of the following factors is not a characteristic of independent contractor status?