Exam 9: Employee Expenses and Deferred Compensation

Martin Corporation granted a nonqualified stock option to employee Caroline on January 1,2013.The option price was $150,and the FMV of the Martin stock was also $150 on the grant date.The option allowed Caroline to purchase 1,000 shares of Martin stock.The option itself does not have a readily ascertainable FMV.Caroline exercised the option on August 1,2017,when the stock's FMV was $250.Caroline sells the stock on September 5,2018,for $300 per share.Martin Corporation will be allowed a deduction of

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.

All of the following individuals are allowed a "for AGI" deduction except:

An employee has unreimbursed travel and business auto expenses.In order to claim the deduction,the employee will report the details (amounts and type of expenditure) on Schedule A (Itemized Deductions) of Form 1040.

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 2017.Connie is employed as a lab technician and earned $30,000 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?

An employer adopts a per diem policy for hotel and meal travel reimbursements for employees,following the IRS tables.Employees will no longer have to submit any documentation.

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.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?

The key distinguishing factor for classifying a worker as either an employee or self-employed includes the right to control and direct the worker with respect to both the end result and the means to accomplish that end result.

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

During 2017,Marcia,who is single and is covered under a pension plan at work,contributes $5,500 into a Roth IRA.If her AGI is $66,000,which of the following is true?

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

Wilson Corporation granted an incentive stock option to Reva on January 1,two years ago.The option price was $300,and the FMV of the Wilson stock was also $300 on the grant date.The option allowed Reva to purchase 150 shares of Wilson stock.Reva exercised the option on August 1,this year,when the stock's FMV was $400.Unless otherwise stated,assume Reva is a qualifying employee.The results of the above transactions to Reva will be

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

Gayle,a doctor with significant investments in the stock market,traveled on a cruise ship to Bermuda.Investment specialists provided daily seminars which Gayle attended.The cost of the cruise for four days is $2,500.Gayle can deduct (before application of any floors)

Richard traveled from New Orleans to New York for both business and vacation.He spent 4 days conducting business and some days vacationing.He incurred the following expenses: What is his miscellaneous itemized deduction (before the floor),assuming Richard is an employee and is not reimbursed,under the following two circumstances? a.He spends three days on vacation,in addition to the business days. b.He spends six days on vacation,in addition to the business days.

Steven is a representative for a textbook publishing company.Steven attends a convention which will also be attended by many potential customers.During the week of the convention,Steven incurs the following costs in entertaining potential customers. Having recently been to a company seminar on tax laws,Steven makes sure that business is discussed at the various dinners,and that the entertainment is on the same day as the meetings with customers.Steven is reimbursed $2,000 by his employer under an accountable plan.Steven's AGI for the year is $50,000,and while he itemizes deductions,he has no other miscellaneous itemized deductions.What is the amount and character of Steven's deduction after any limitations?

According to the IRS,a person's tax home is the location of the family residence regardless of the location of the taxpayer's principal place of employment.

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

Ron obtained a new job and moved from Houston to Washington.He incurred the following moving expenses: Assuming Ron is eligible to deduct his moving expenses,what is the amount of the deduction?

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.