Exam 18: Employee Expenses and Deferred Compensation

Jordan,an employee,drove his auto 20,000 miles this year,15,000 to meetings with clients and 5,000 for commuting and personal use.The cost of operating the auto for the year was as follows: Jordan submitted appropriate reports to his employer,and the employer paid a reimbursement of $ .50 per mile.Jordan has used the actual cost method in the past.Jordan's AGI is $50,000.What is Jordan's deduction for the use of the auto after application of all relevant limitations?

The maximum tax deductible contribution to a traditional IRA in 2015 is $5,500 ($6,500 for a taxpayer age 50 or over).

Wilson Corporation granted an incentive stock option to Reva on January 1,two years ago.The option price was $300,and the FMV of the Wilson stock was also $300 on the grant date.The option allowed Reva to purchase 150 shares of Wilson stock.Reva exercised the option on August 1,this year,when the stock's FMV was $400.Unless otherwise stated,assume Reva is a qualifying employee.The results of the above transactions to Reva will be

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

Chuck,who is self-employed,is scheduled to fly from Minneapolis to London on a business trip.His flight schedule included a connection through New York City.When Chuck arrived in New York City,he learned that his flight to London had been cancelled due to a volcanic eruption in Iceland.All air travel to Europe was delayed for five days because of significant amounts of ash in the air,causing Chuck to incur costs for hotel and meals in New York City.Since Chuck had never been to New York City before,he spent the time sightseeing.What tax issues are present?

Martin Corporation granted an incentive stock option to employee Caroline on January 1,2012.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 160 shares of Martin stock.Caroline exercised the option on August 1,2014 when the stock's FMV was $250.Unless otherwise stated,assume Caroline is a qualifying employee.If Caroline sells the stock on September 5,2015 for $350 per share,she must recognize (ignore alternative minimum tax)

Shane,an employee,makes the following gifts,none of which are reimbursed: What amount of the gifts is deductible before application of the 2% of AGI floor for miscellaneous itemized deductions?

Norman traveled to San Francisco for four days on vacation,and while there spent another two days conducting business for his employer.Norman's plane fare for the trip was $500; meals cost $150 per day; hotels cost $300 per day; and a rental car cost $150 per day that was used for all six days.Norman was not reimbursed by his employer for any expenses.Norman's AGI for the year is $40,000 and he did not have any other miscellaneous itemized deductions.Norman may deduct (after limitations)

Sarah purchased a new car at the beginning of the year.She makes an adequate accounting to her employer and receives a $2,400 (12,000 miles × 20 cents per mile)reimbursement in 2015 for employment-related business miles.She incurs the following expenses related to both business and personal use: She also spent $200 on parking and tolls that were related to business.During the year she drove a total 20,000 miles. What are the possible amounts of Sarah's deductible transportation expenses?

Dighi,an artist,uses a room in his home (250 square feet)as a studio exclusively to paint.The studio meets the requirements for a home office deduction.(Painting is considered his trade or business.)The following information appears in Dighi's records: Expenses related to home office: (a)What is the amount of Dighi's home office deduction if he is self-employed? (b)If some amount is not allowed under the tax law,how is the disallowed amount treated? (c)Assume all of Dighi's records of expenses relating to the room were destroyed in a major paint spill.How much of a home office deduction,if any,will he be allowed?

Employees receiving nonqualified stock options recognize ordinary income at the grant date or exercise date if there is a readily ascertainable fair market value.

A sole proprietor will not be allowed to deduct current home office expenses to the extent that they create or increase a loss from her business.

A tax adviser takes a client to a major league hockey game following the conclusion of a meeting involving the signing of a major planning engagement.As it is not "directly related," the entertainment cannot be deductible.

The following individuals maintained offices in their home: (1)Dr.Austin is a self-employed surgeon who performs surgery at four hospitals.He uses his home for administrative duties as he does not have an office in any of the hospitals. (2)June,who is a self-employed plumber,earns her living in her customer's homes.She maintains an office at home where she bills clients and does other paperwork related to her plumbing business. (3)Cassie,who is an employee of Montgomery Electrical,is provided an office at the work but does significant administrative work at home.Her employer does not require her to do extra work but she feels it is necessary in order to properly do her job. Who is entitled to a home office deduction?

Tia is a 52-year-old an unmarried taxpayer who is an active participant in an employer-sponsored qualified retirement plan.Before IRA contributions,her AGI is $65,000 in 2015. a.What is the maximum amount she can contribute and the maximum deduction she can receive for a contribution to a traditional IRA? b.What is the maximum amount she can contribute and the maximum deduction she can receive for a contribution to a Roth IRA?

If the standard mileage rate is used in the first year,the actual expense method may not be used in future years.

Travel expenses related to temporary work assignments of one year or less are deductible.

Tyler (age 50)and Connie (age 48)are a married couple.Tyler is covered under a qualified retirement plan at his job and earned $175,000 in 2015.Connie is employed as a lab technician and earned $30,000 but is not covered under a qualified retirement plan.They file a joint return; have interest and dividend income of $30,000.What is their maximum for AGI deduction for contributions to a traditional IRA?

An employer adopts a per diem policy for hotel and meal travel reimbursements for employees,following the IRS tables.Employees will no longer have to submit any documentation.

Which of the following statements is incorrect regarding the SEP IRA?