Exam 9: Employee Expenses and Deferred Compensation

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?

Unreimbursed employee business expenses are deductions for AGI.

Educational expenses incurred by a bookkeeper for courses necessary to sit for the CPA exam are fully deductible.

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

Which of the following statements is correct regarding limitations on employer's contributions to qualified retirement plans in 2017?

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

Jack takes a $7,000 distribution from his Health Savings Account.$2,000 is used to pay for X-rays and dental surgery.The other $5,000 is used to make a down payment on a new car.What are the tax consequences to Jack?

Josiah is a human resources manager of a large software company.He is considering asking for a leave of absence to pursue an MBA degree.Josiah will pay for his MBA tuition of $45,000 a year without any employer assistance.Josiah will incur a large debt if he pursues an MBA.Upon completing his MBA,he would want to consider various job opportunities.Discuss the tax issues affecting Josiah's decision.

Allison,who is single,incurred $4,000 for unreimbursed employee expenses,$10,000 for mortgage interest and real estate taxes on her home,and $500 for investment counseling fees.Allison's AGI is $80,000.Allison's allowable deductions from AGI are (after limitations have been applied)

Rita,a single employee with AGI of $100,000 before consideration of the items below,incurred the following expenses during the year,all of which were unreimbursed unless otherwise indicated: In addition,Rita paid $300 for dues to her professional business association.The company reimbursed her after she submitted the appropriate documentation for the dues.What is Rita's net miscellaneous itemized deduction for the year after application of all relevant limitations?

Edward incurs the following moving expenses: The employer reimburses Edward for the full $10,000.What is the amount to be reported as income by Edward?

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.If Caroline sells the stock on September 5,2018,for $300 per share,she must recognize

Pat is a sales representative for a publishing company.He entertains customers as part of his job.During the current year he spends $10,000 on business entertainment.The company reimburses him $5,000.Before consideration of the entertainment costs and the reimbursement,Pat earns AGI of $100,000,and he has itemized deductions of $12,000 due to mortgage interest and taxes.Pat is single,with no dependents.What is Pat's taxable income a.assuming the employer maintains an accountable plan? b.assuming the employer does not maintain an accountable plan?

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.

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.

A taxpayer goes out of town to a business convention.The 50% reduction applies to the cost of food,entertainment and transportation expenses.

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.

Fin is a self-employed tutor,regularly meeting with clients in a 100 square foot area of his home.Fin is terrible at keeping records.Without the records,he will be able to deduct $500 for a home office deduction for AGI.

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