Exam 9: Employee Expenses and Deferred Compensation

Personal travel expenses are deductible as miscellaneous itemized deductions subject to the 2% of AGI floor.

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

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

Tucker (age 52) and Elizabeth (age 48) are a married couple.Tucker is covered under a qualified retirement plan at his job and earned $90,000 in 2017.Elizabeth 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 $25,000.What is the maximum amount of tax deductible contributions that may be made to a traditional IRA?

Jason,who lives in New Jersey,owns several apartment buildings in Baltimore.His travel expenses to Baltimore to inspect his property are tax deductible.

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

All of the following are true with regard to a Roth IRA except

Clarissa is a very successful real estate agent.She spends $5,000 per year taking her clients out to dinner upon completion of a sale.Unfortunately,Clarissa is not a good recordkeeper and does not maintain receipts.However,such entertainment is standard practice in her field,and trade journals indicate that $5,000 is a reasonable amount for a successful high-end agent.Before consideration of the 2% of AGI floor,Clarissa will be allowed to deduct $2,500.

Feng,a single 40-year-old lawyer,is covered by a qualified retirement plan at work.His salary is $115,000,and his total AGI is $127,000.The maximum contribution he can make to a Roth IRA in 2017 is

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 1,2016,when the stock's FMV was $250.Unless otherwise stated,assume Caroline is a qualifying employee.If Caroline sells the stock on July 5,2017,for $400 per share,she must recognize

A tax adviser takes a client to a major league hockey game following the conclusion of a meeting involving the signing of a major planning engagement.As it is not "directly related," the entertainment cannot be deductible.

Commuting to and from a job location is a deductible expense.

Jordan,an employee,drove his auto 20,000 miles this year,15,000 to meetings with clients and 5,000 for commuting and personal use.The cost of operating the auto for the year was as follows: Jordan submitted appropriate reports to his employer,and the employer paid a reimbursement of $ .50 per mile.Jordan has used the actual cost method in the past.Jordan's AGI is $50,000.What is Jordan's deduction for the use of the auto after application of all relevant limitations?

Charles is a self-employed CPA who maintains a qualifying office in his home.Charles has $110,000 gross income from his practice and incurs $88,000 in salaries,supplies,computer services,etc.Charles's mortgage interest and real estate taxes allocable to the office total $10,000.Other expenses total $14,000 and consist of depreciation,utilities,insurance,and maintenance.What is Charles' total home office expense deduction?

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?

Kim currently lives in Buffalo and works in Rochester,a 60-mile commute each way.Kim accepts a new job in a town outside of Rochester,and the new commute is 75-miles each way.Kim decides the commute for the new job is too long,and she moves to Rochester.Kim is eligible to deduct her moving expenses.

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

Chuck,who is self-employed,is scheduled to fly from Minneapolis to London on a business trip.His flight schedule included a connection through New York City.When Chuck arrived in New York City,he learned that his flight to London had been cancelled due to a volcanic eruption in Iceland.All air travel to Europe was delayed for five days because of significant amounts of ash in the air,causing Chuck to incur costs for hotel and meals in New York City.Since Chuck had never been to New York City before,he spent the time sightseeing.What tax issues are present?

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

Avantra Inc.is a professional firm with the professional employee group generally in the top tax bracket and the support staff generally in the 15% tax bracket.Due to rising costs and administrative burden,the company is considering discontinuing its dental and eye care insurance plan and instead giving all employees a $600 raise.Based on insurance records the average employee incurs about $400 of dental and eye care expense per year.Which of the following statements is correct?