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

There is no cutback adjustment for meals and entertainment as to employees who are subject to regulation by the U.S. Department of Transportation.

A taxpayer just changed jobs and incurred unreimbursed moving expenses. a.What are his (or her) options if an income tax return has to be filed before the time test is met? b.What happens if the moving expense deduction has been claimed and the time test is not later satisfied?

Liam just graduated from college. Because it is his first job, the cost of moving his personal belongings from his parents' home to the job site does not qualify for the moving expense deduction.

Alexis (a CPA) sold her public accounting practice in Des Moines and accepted a job with the Seattle office of a national accounting firm. Her moving expenses are not deductible because she has changed employment status (i.e., went from self-employed to employee).

Match the statements that relate to each other. (Note: Choice L may be used more than once.) a.Must involve the same trade or business b.Must be for the convenience of the employer c.Meals while in route d.Lodging while in route e.Out-of-town job assignment lasts for more than one year f.Can include actual cost of parking g.Payment for services rendered based on tasks performed h.Excludes use of MACRS depreciation i.Taxpayer has tools and helper provided for him j.Transportation must be allocated if taxpayer spends two weeks on business and one week sightseeing k.Paralegal obtains a law degree l.Correct match not provided -Nondeductible moving expense

Match the statements that relate to each other. (Note: Choice L may be used more than once.) a.Must involve the same trade or business b.Must be for the convenience of the employer c.Meals while in route d.Lodging while in route e.Out-of-town job assignment lasts for more than one year f.Can include actual cost of parking g.Payment for services rendered based on tasks performed h.Excludes use of MACRS depreciation i.Taxpayer has tools and helper provided for him j.Transportation must be allocated if taxpayer spends two weeks on business and one week sightseeing k.Paralegal obtains a law degree l.Correct match not provided -Mixed use (both business and pleasure) foreign travel

A taxpayer takes six clients to an NBA playoff game. If all of the tickets (list price of $120 each) are purchased on the Internet for $1,800 ($300 each), only $60 ($120 × 50% cutback adjustment) per ticket is deductible.

A worker may prefer to be classified as an employee (rather than an independent contractor) for which of the following reasons:

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

If an individual is subject to the direction or control of another only to the extent of the end result but not as to the means of accomplishment, an employer-employee relationship does not exist.

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 -Club dues not deductible

Taylor performs services for Jonathan on a regular basis. There exists considerable doubt as to whether Taylor is an employee or an independent contractor. a.What can Jonathan do to clarify the matter? b.Suppose Jonathan treats Taylor as an independent contractor but Taylor thinks she is an employee. What is Taylor's recourse, if any?

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. a.Indicates employee status. b.Indicates independent contractor status. -Sue has unreimbursed expenses.

A taxpayer who claims the standard deduction will not be able to claim an office in the home deduction.

Which, if any, of the following expenses is subject to the 2%-of-AGI floor?

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

In some cases it may be appropriate for a taxpayer to report work-related expenses by using both Form 2106 and Schedule C.

Qualified moving expenses include the cost of lodging but not meals during the move.

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. a.Indicates employee status. b.Indicates independent contractor status. -Lynn determines when the services are to be performed.

Allowing for the cutback adjustment (50% reduction for meals and entertainment), which of the following trips, if any, will qualify for the travel expense deduction?