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

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Question 91

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Under the automatic mileage method, one rate does not cover every type of expense. For 2017, what are the rates for business use, education, moving, charitable, and medical?

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$0.535 (business use...

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Question 92

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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?

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$1,255. $320 + [($460 + $920 + $200) × 5...

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Question 93

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For tax year 2016, Taylor used the simplified method of determining her office in the home deduction. For 2017, Taylor must continue to use the simplified method and cannot switch to the regular (actual expense) method.

Aiden performs services for Lucas. Which, if any, of the following factors indicate that Aiden is an employee, rather than an independent contractor?

Regarding the new simplified method of computing the office in the home deduction, comment on the following independent factors. a. Taxpayer has set aside 400 square feet for use as an office. b. Taxpayer has repainted and recarpeted the office area. c. In past years, taxpayer has always taken the deduction using the regular (actual expense) method. d. The net income from the business is not large.

Meg teaches the fifth grade at a local school. During the year, she spends $1,200 for school supplies for use in her classroom. On her income tax return, some of this expense is not reported and the balance is deducted in two different places. Explain what has probably happened.

One of the tax advantages of being self-employed (rather than being an employee) is:

Bob lives and works in Newark, NJ. He travels to London for a three-day business meeting, after which he spends three days touring Scotland. All of his air fare is deductible.

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 -Distance test (for moving expenses) not satisfied

Which, if any, of the following expenses are not subject to the 2%-of-AGI floor?

If the cost of uniforms is deductible, their maintenance cost (e.g., laundry, dry cleaning, alterations) also is deductible.

A taxpayer who lives and works in Tulsa travels to Buffalo for five days. If three days are spent on business and two days are spent on visiting relatives, only 60% of the airfare is deductible.

For the current football season, Tern Corporation pays $40,000 for a skybox (containing 12 seats) at Veterans Stadium for eight home games. Regular nonskybox seats at each game range from $120 to $150 a seat. In November, a Tern employee and ten clients use the skybox to attend a game. The event is preceded by a bona fide business discussion, and Tern spent $1,000 for food and drinks during the game. What is Tern's deduction?

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 -Roth IRAs

A taxpayer who claims the standard deduction will not avoid the 2%-of-AGI floor on unreimbursed employee expenses.

Sick of her 65 mile daily commute, Edna purchases a condo that is only four miles from her job. Edna's moving expenses to her new condo are not allowed and cannot be claimed by her as a deduction.

If a taxpayer does not own a home but rents an apartment, the office in the home deduction is not available.

In connection with the office in the home deduction, comment on the following: a.Mixed use (i.e., business and personal) of the portion of the home allocated to business. b.The difference between direct and indirect expenses for deduction purposes. c.The classification of the expense (i.e., dfor or dfrom AGI).