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

By itself,credit card receipts will not constitute adequate substantiation for travel expenses.

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 2017,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 $64,000.As to these expenses,what are Arnold's: a.​Deductions for AGI? b.Deductions from AGI?

Match the statements that relate to each other. (Note: Choice L may be used more than once.) a.Cover charge paid to entertain client at a night club. b.Deductible even if taxpayer does not take the new job c.Company picnic sponsored by employer d.Use of Federal per diem allowance to substantiate meals while in travel status e.Does not have to be job related f.Can include cost of car insurance and automobile club dues g.Distribution from plan is taxable h.Distribution from plan is not taxable i.Expatriate (U.S. person who is employed overseas) returns home to retire j.Taxpayer moves to a new residence 55 miles closer to his present job k.Country club membership fee l.Correct match not provided -Actual cost method of determining car expense

Travel status requires that the taxpayer be away from home overnight. a.What does "away from home overnight" mean? b.What tax advantages result from being in travel status?

Alexis (a CPA) sold her public accounting practice in Des Moines and accepted a job with the Seattle office of a national accounting firm.Her moving expenses are not deductible because she has changed employment status (i.e.,went from self-employed to employee).

Lloyd,a practicing CPA,pays tuition to attend law school.Since a law degree involves education leading to a new trade or business,the tuition is not deductible.

Flamingo Corporation furnishes meals at cost to its employees by means of a cafeteria it maintains.The cost of operating the cafeteria is not subject to the cutback adjustment.

Match the statements that relate to each other. (Note: Choice L may be used more than once.) a.Must involve the same trade or business b.Must be for the convenience of the employer c.Meals while in route d.Lodging while in route e.Out-of-town job assignment lasts for more than one year f.Can include actual cost of parking g.Payment for services rendered based on tasks performed h.Excludes use of MACRS depreciation i.Taxpayer has tools and helper provided for him j.Transportation must be allocated if taxpayer spends two weeks on business and one week sightseeing k.Paralegal obtains a law degree l.Correct match not provided -Characteristic of a taxpayer who has the status of an employee

Amy lives and works in St.Louis.In the morning she flies to Boston,has a three-hour business meeting,and returns to St.Louis that evening.For tax purposes,Amy was away from home.

The work-related expenses of an independent contractor will be subject to the 2%-of-AGI floor.

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

James has a job that compels him to go to many different states during the year.It is possible that James was never away from his tax home during the year.

Taylor performs services for Jonathan on a regular basis.There exists considerable doubt as to whether Taylor is an employee or an independent contractor. a.What can Jonathan do to clarify the matter? b.Suppose Jonathan treats Taylor as an independent contractor but Taylor thinks she is an employee. What is Taylor's recourse, if any?

Meredith holds two jobs and attends graduate school on weekends.The education improves her skills,but does not qualify her for a new trade of business.Before going to the second job,she returns home for dinner.Relevant mileage is as follows: ​ How much of the mileage qualifies for deduction purposes?

Regarding tax favored retirement plans for employees and self-employed persons,comment on the following: a.The exclusion versus deduction approaches as to contributions by participants. b.Tax-free accumulation of earnings. c.The deferral of income tax consequences. d.Employee versus self-employed status.

Cathy takes five key clients to a nightclub and incurs the following costs: $320 limousine rental,$460 cover charge,$920 drinks and dinner,and $200 tips.Several days after the function,Cathy mails each client a pen costing $25.In addition,Cathy pays $4 for gift wrapping and mailing each pen.Assuming adequate substantiation and a business justification,what is Cathy's deduction?

Qualified moving expenses include the cost of lodging but not meals during the move.

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. a.Indicates employee status. b.Indicates independent contractor status. -Sue files a Form 2106 with her Form 1040.

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. The floor space of Rocky's residence is 2,500 square feet,and he estimates that 20% of this is devoted exclusively to the repair business (i.e.,500 square feet).Gross income from the business is $13,000,while expenses (other than home office) are $5,000.Expenses relating to the residence are as follows: What is Rocky's net income from the repair business ​ a.If he uses the regular (actual expense) method of computing the deduction for office in the home? b.If he uses the simplified method?

A deduction for parking and other traffic violations incurred during business use of the automobile is allowed under the actual cost method but not the automatic mileage method.