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

The Federal per diem rates that can be used for "deemed substantiated" purposes are the same for all locations in the country.

Qualified business income (QBI) is defined as the ordinary income less ordinary deductions a taxpayer earns from a qualified trade or business (e.g., from a sole proprietorship, S corporation, or partnership) conducted in the United States by the taxpayer.

Cathy takes five key clients to dinner and incurs the following costs: $320 limousine rental, $920 drinks and dinner, and $200 tips; assume that there were substantive business discussions during dinner. 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?

Both traditional and Roth IRAs possess the advantage of tax-free accumulation of income within the plan.

Which of the following expenses, if any, are deductible?

Myra's classification of those who work for her as independent contractors is being questioned by the IRS. It is the position of the IRS that these workers are really employees. What type of factors can Myra utilize to justify her classification?

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.

Meg teaches 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.

For which of the following situations, if any, is the automatic mileage available?

Ethan, a bachelor with no immediate family, uses Pine Shadows Country Club exclusively for his business entertaining. All of Ethan's annual dues for his club membership are deductible.

Employees who render an adequate accounting to employers and are fully reimbursed will shift the 50% overall limitation on meal expenses to their employer.

For tax year 2019, Taylor used the simplified method of determining her office in the home deduction. For 2020, Taylor must continue to use the simplified method and cannot switch to the regular (actual expense) method.

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?

Jackson gives both his supervisor and her husband a $30 box of chocolates at Christmas. Jackson may claim only $25 as a deduction.

The moving expense deduction has been eliminated for all taxpayers.

Paul is employed as an auditor by a CPA firm. On most days, he commutes by auto from his home to the office. During one month, however, he has an extensive audit assignment closer to home. For this engagement, Paul drives directly from home to the client's premises and back. Mileage information follows: Home to office 12 miles Office to audit client 15 miles Audit client to home 10 miles If Paul spends 20 days on the audit and provides an adequate accounting to his employer, what is his reimburseable mileage?

Fran is a CPA who has a small tax practice in addition to working as the controller for a local manufacturing business. Fran runs her tax practice out of a 150-square foot office in her home where she meets clients and works on their tax returns and researches their tax issues. She meets the exclusive use test for this space. The gross income from her tax practice amounts to $7,500 for the year. Business expenses amount to $1,000. Based on square footage, $4,000 of Fran's mortgage interest and real estate taxes are allocable to the home office. The allocable portion of maintenance, utilities, and depreciation is $4,500. Assuming no other expenses related to the business were incurred, what amount of the maintenance, utilities, and depreciation is deductible by Fran?

Jane, single, owns a single-family residence that she rents out to a long-term tenant. Her tax adviser's newsletter explains that some rental property owners can obtain a new deduction for their qualified business income starting in 2018. The article notes that if clients have questions, they can contact the firm. Because Jane's rental property generates a loss, she assumes that this new deduction is not relevant to her. Is Jane correct? Explain.

Aaron is a self-employed practical nurse who works from his home. He provides nursing care for disabled persons living in their residences. During the day, he drives his car as follows. Miles Aaron's home to patient Louise 12 Patient Louise to patient Carl 4 Patient Carl to patient Betty 6 Patient Betty to Aaron's home 10 Aaron's deductible mileage for each workday is:

For tax purposes, a statutory employee is treated the same way as a common law employee.