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

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 -Actual cost method of determining car expense

If a business retains someone to provide services, that person may either be an employee or be self-employed (i.e., independent contractor). a.What are the tax advantages to the business of having the service provider classified as self-employed? b.What are the advantages and disadvantages to the service provider of self-employed status?

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

Travis holds rights to a skybox (containing 10 seats) at Memorial Stadium which he uses to entertain key clients. At one sporting event, he took only six clients since three were ill. Even so, Travis may still deduct the appropriate cost of all ten seats.

Discuss the 2%-of-AGI floor and the 50% cutback limitation in connection with various employee expenses under the following arrangements: a.The employee is not reimbursed by the employer. b.The employee is fully reimbursed under a nonaccountable plan. c.The employee is partially reimbursed under an accountable plan. d.The employee is fully reimbursed under an accountable plan.

For the current year, Wilbur is employed as a deputy sheriff of a county. He has AGI of $50,000 and the following unreimbursed employee expenses: ​ How much of these expenses are allowed as deductions from AGI?

Concerning the deduction for moving expenses, what circumstances, if any, will excuse a taxpayer from meeting the time test of 39 or 78 weeks?

The § 222 deduction for tuition and related expenses is available:

Which, if any, of the following is subject to a cutback adjustment?

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

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

Isabella is a dental hygienist who works for five different dentists. She spends one day a week (i.e., Monday through Friday) with each. All of the dentists except Dr. Stanki (the Wednesday assignment) treat her as an employee. Dr. Stanki, however, classifies her as being self-employed. Comment on this discrepancy in treatment.

Under the simplified method, the maximum office in the home deduction allowed is the greater of $1,500 or the office square feet × $5.

A statutory employee is not a common law employee but is subject to Social Security tax.

In the current year, Bo accepted employment with a Kansas City law firm after graduating from law school. Her expenses for the year are listed below: ​ Since Bo worked just part of the year, her salary was only $32,100. In terms of deductions from AGI, how much does Bo have?

One indicia 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).

A taxpayer who uses the automatic mileage method for the business use of an automobile can change to the actual cost method in a later year.

At age 65, Camilla retires from her job in Boston and moves to Florida. As a retiree, she is not subject to the time test in deducting her moving expenses.

Christopher just purchased an automobile for $40,000 which he plans to claim 100% as being for business use. In order to take advantage of MACRS and § 179, he plans to use the actual cost method for determining his deduction in the first year. In subsequent years, he will switch to the automatic mileage method. Comment on Christopher's proposed approach.

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