Exam 9: Deductions: Employee and Self-Employed Related Expenses

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.

In terms of IRS attitude, what do the following expenses have in common?

Ramon and Ingrid work in the field of public relations and incur sizable entertainment expenses.Ramon is employed by a consumer products company, while Ingrid is a self-employed consultant.Regarding the tax treatment of the entertainment expenses, when would:

If an individual is subject to the direction or control of another only to the extent of the end result but not as to the means of accomplishment, an employer-employee relationship does not exist.

Which, if any, of the following is subject to the cutback adjustment?

Tom owns and operates a lawn maintenance company. He does not concern himself with employment taxes because he considers all the persons who work for him to be independent contractors. He bases this assumption of the fact that several of his friends who operate similar businesses follow the same approach. Comment on Tom's situation.

Jackson gives his supervisor a $30 box of chocolates on her birthday.Jackson may claim only $25 as a deduction.

Statutory employees:

Edna lives and works in Cleveland.She travels to Berlin for an eight-day business meeting, after which she spends four days touring Germany.All of Edna's airfare is deductible.

Ashley and Matthew are husband and wife and both are practicing CPAs.On a joint return, Ashley gets to deduct her professional dues but Matthew does not.Explain.

A taxpayer who uses the automatic mileage method to compute auto expenses can also deduct the business portion of tolls and parking.

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.

A taxpayer takes six clients to an NBA playoff game.If all of the tickets (list price of $120 each) are purchased on the Internet for $1,800 ($300 each), only $150 ($300 ´ 50% cutback adjustment) per ticket is deductible.

After graduating from college, Clint obtained employment in Omaha.In moving from his parents' home in Baltimore to Omaha, Clint incurred the following expenses:

In a direct transfer from one qualified retirement plan to another qualified retirement plan, the employer must withhold 20% of the amount of the direct transfer.

Under the right circumstances, a taxpayer's meals and lodging expense can qualify as a deductible education expense.

Ethan, a bachelor with no immediate family, uses the Pine Shadows Country Club exclusively for his business entertaining.None of Ethan's annual dues for his club membership are deductible.

During 2012, Eva used her car as follows: 12,000 miles (business), 1,400 miles (commuting), and 4,000 miles (personal).In addition, she spent $440 for tolls (business) and $620 for parking (business).If Eva uses the automatic mileage method, what is the amount of her deduction?

Samuel, age 53, has a traditional deductible IRA with an account balance of $112,000.Of this amount, $82,000 represents contributions and $30,000 represents earnings.In 2012, he converts his traditional IRA into a Roth IRA.What amount must Samuel include in his gross income, if any, in 2012?

Kelly, an unemployed architect, moves from Boston to Phoenix to accept a job as a chef at a restaurant.Kelly's moving expenses are not deductible because her new job is in a different trade or business.