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

During the year, John (a self-employed management consultant) went from Milwaukee to Hawaii on business. Preceding a five-day business meeting, he spent four days vacationing at the beach. Excluding the vacation costs, his expenses for the trip are: Airfare \ 3,200 Lodging 900 Meals 800 Entertainment 600 Presuming no reimbursement, deductible expenses are:

In the case of an office in the home deduction, the exclusive business use test does not apply when the home is used as a daycare center.

Mallard Corporation pays for a trip to Aruba for its two top salespersons. This expense is subject to the overall limitation (50%).

Which of the following factors, if any, is a characteristic of independent contractor status?

Which of the following, if any, is subject to an overall limitation on meals?

Rocky has a full-time job as an electrical engineer for the city utility. In his spare time, he repairs electronic gear 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 items 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? expenses (other than home office) are $5,000. Expenses relating to the residence are as follows: Real property taxes \ 4,500 Interest on home mortgage 8,000 Operating expenses of residence 3,000 Depreciation (based on 20\% business use) 1,000 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?

Flamingo Corporation furnishes meals at cost to its employees at a cafeteria it maintains. The cost of operating the cafeteria is not subject to the overall limitation (50%).

During the year, Sophie (a self-employed marketing consultant) went from Omaha to Lima, Peru, on business. She spent four days on business, two days on travel, and four days on vacation. Disregarding the vacation costs, Sophie's expenses are: Airfare \ 3,000 Lodging 800 Meals 600 Entertainment 400 Sophie's deductible expenses are:

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

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 2019, 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 is Arnold's deduction for AGI?

A self-employed taxpayer who uses the automatic mileage method to compute auto expenses can also deduct the business portion of automobile club dues.

Under the automatic mileage method, one rate does not cover every type of expense. For 2019, what are the rates for business use, charitable, and medical?

Which of the following miscellaneous expenses is deductible?

Jacob is a landscape architect who works out of his home. He wonders whether or not he will have nondeductible commuting expenses when he drives to the locations of his clients. Please comment.

Which of the following expenses, if any, qualify as deductible?

In some cases, it may be appropriate for a taxpayer to deduct work-related expenses as both a sole proprietor and an employee.

Nick Lee is a linebacker for the Baltimore Ravens (a professional football club). During the football season he rents an apartment in a Baltimore suburb. The rest of the time he lives with his family in Ann Arbor, MI, and works at a local bank as a vice president in charge of public relations. Can Nick deduct his expenses while away from Ann Arbor? Explain.

When is a taxpayer's work assignment in a new locale temporary? Permanent? What difference does it make?

One indicator of independent contractor (rather than employee) status is when the individual performing the services is paid based on time spent (rather than on tasks performed).

Marvin lives with his family in Alabama. He has two jobs: one in Alabama and one in North Carolina. His tax home is where he lives (Alabama).