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

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

A moving expense deduction is allowed even if at the time of the move the taxpayer did not have a job at the new location.

Elaine, the regional sales director for a manufacturer of exercise equipment, pays $2,500 to rent a skybox for a visiting performance of the Harlem Globetrotters.The skybox holds 10 seats, and Elaine invites 7 clients to the event.Nonluxury seats range in price from $80 to $120.The refreshments provided during the event cost $600.If Elaine meets all of the requirements for deductibility (i.e., business discussion, substantiation), she may deduct:

Dove Corporation pays for a trip to Jamaica for its two top salespersons.This expense is not subject to the cutback adjustment.

Jake performs services for Maude. If Jake provides his own helper and tools, this is indicative of independent contractor (rather than employee) status.

The IRS will not issue advanced rulings as to whether a worker's status is that of an employee or an independent contractor.

As Christmas presents, Lily sends gift certificates (each valued at $25) to Caden (a key client) and to each of his two minor children.Lily can deduct $75 (3 ´ $25) as to these gifts.

Qualified moving expenses of an employee that are not reimbursed are a deduction for AGI.

By itself, credit card receipts will constitute adequate substantiation for travel expenses.

Aaron is a self-employed practical nurse who works out of his home.He provides nursing care for disabled persons living in their residences.During the day he drives his car as follows. Aaron's deductible mileage for each workday is:

Arnold is employed as an assistant manager in the furniture division of a national chain of department stores.He is a recent college graduate with a degree in marketing.During 2012, he enrolls in the evening MBA program of a local university and incurs the following expenses: tuition, $4,200; books and computer supplies, $800; transportation expense to and from the university, $450; and meals while on campus, $400.Arnold is single and his annual AGI is $66,000.As to these expenses, what are Arnold's:

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

Alfredo, a self-employed patent attorney, flew from his home in Chicago to Miami, had lunch alone at the airport, conducted business in the afternoon, and returned to Chicago in the evening.His expenses were as follows: What is Alfredo's deductible expense for the trip?

Which, if any, of the following expenses is subject to the 2%-of-AGI floor?

As to meeting the time test for purposes of deducting moving expenses, which of the following statements is correct?

Statutory employees:

If a business retains someone to provide services, that person may either be an employee or be self-employed (i.e., independent contractor).

Debby is a self-employed accountant with a qualified defined benefit plan (a Keogh plan).She has the following income items for the year: What is the maximum amount Debby can deduct as a contribution to her retirement plan in 2012, assuming the self-employment tax rate is 15.3%?

After she finishes working at her main job, Ann returns home, has dinner, then drives to her second job.Ann may deduct the mileage between her home and second job.

The portion of the office in the home deduction that exceeds the income from the business can be carried over to future years.