Exam 9: Employee Expenses and Deferred Compensation

Travel expenses related to foreign conventions are disallowed unless the meeting is directly related to the taxpayer's business or is employment related and it is reasonable for the meeting to be held outside of North America.

Frank is a self-employed CPA whose 2014 net earnings from his trade or business (before the H.R. 10 plan contribution but after the deduction for one-half of self-employment taxes)is $240,000. What is the maximum contribution that Frank can make on his behalf to his H.R. 10 (Keogh)plan in 2014?

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

If an individual is self-employed, business-related expenses are deductions for AGI.

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

Joe is a self-employed tax attorney who frequently entertains his clients at his country club. Joe's club expenses include the following: Assuming the business meals and entertainment qualify as deductible entertainment expenses, Joe may deduct

Which of the following statements regarding independent contractors and employees is true (ignore temporary provisions)?

Travel expenses for a taxpayer's spouse are deductible if the spouse is an employee, the travel is for a bona fide purpose, and the expenses are otherwise deductible.

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?

Generally, 50% of the cost of business gifts is deductible up to $25 per donee per year.

All of the following characteristics are true of an incentive stock option with the exception of

SIMPLE retirement plans allow a higher level of employer contributions than do SEP IRAs.

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

Mirasol Corporation granted an incentive stock option to employee Josephine two years ago. The option price was $150 and the FMV of the Mirasol stock was also $150 on the grant date. The option allowed Josephine to purchase 160 shares of Mirasol stock. Josephine exercised the option this year when the stock's FMV was $250. Unless otherwise stated, assume Josephine is a qualifying employee. The results of the above transactions to Mirasol Corporation will be

Which of the following statements regarding Health Savings Accounts is incorrect?

Ruby Corporation grants stock options to Iris on February 1, 2013. The options do not have a readily ascertainable value. The option price is $100, and the FMV of the Ruby stock is also $100 on the grant date. The option allows Iris to purchase 200 shares of Ruby stock. Iris exercises the option on August 1, 2014, when the stock's FMV is $150. Iris sells the stock on December 5, 2015 for $400. Determine the amount and character (i.e. ordinary, LTCG or STCG)of income recognized by Iris and the deduction allowed Ruby Corporation in 2013, 2014 and 2015 under the following assumptions: a. The stock option is an incentive stock option. b. The stock option is a nonqualified stock option.

Which of the following is true about H.R.10 (Keogh)plans?

Which statement is correct regarding SIMPLE retirement plans?

Under a qualified pension plan, the employer's deduction is usually deferred until the employee recognizes income.

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 $64,000 in 2014. 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?