Exam 25: Employee Expenses and Deferred Compensation

Avantra Inc.is a professional firm with the professional employee group generally in the top tax bracket and the support staff generally in the 15% tax bracket.Due to rising costs and administrative burden,the company is considering discontinuing its dental and eye care insurance plan and instead giving all employees a $600 raise.Based on insurance records the average employee incurs about $400 of dental and eye care expense per year.Which of the following statements is correct?

In determining whether travel expenses are deductible,a general rule is that if a person is reassigned for an indefinite period,the individual's tax home shifts to the new location and travel expenses are not deductible.

Johanna is single and self-employed as a technology consultant.She wants to set money aside for her retirement.What tax and financial issues should she consider?

Brittany,who is an employee,drove her automobile a total of 20,000 business miles in 2017.This represents about 75% of the auto's use.She has receipts as follows: Brittany's AGI for the year is $50,000,and her employer does not provide any reimbursement.She uses the standard mileage rate method.After application of any relevant floors or other limitations,Brittany can deduct

Personal travel expenses are deductible as miscellaneous itemized deductions subject to the 2% of AGI floor.

Characteristics of profit-sharing plans include all of the following with the exception of:

A sole proprietor will not be allowed to deduct current home office expenses to the extent that they create or increase a loss from her business.

Richard traveled from New Orleans to New York for both business and vacation.He spent 4 days conducting business and some days vacationing.He incurred the following expenses: What is his miscellaneous itemized deduction (before the floor),assuming Richard is an employee and is not reimbursed,under the following two circumstances? a.He spends three days on vacation,in addition to the business days. b.He spends six days on vacation,in addition to the business days.

Jack takes a $7,000 distribution from his Health Savings Account.$2,000 is used to pay for X-rays and dental surgery.The other $5,000 is used to make a down payment on a new car.What are the tax consequences to Jack?

Steven is a representative for a textbook publishing company.Steven attends a convention which will also be attended by many potential customers.During the week of the convention,Steven incurs the following costs in entertaining potential customers. Having recently been to a company seminar on tax laws,Steven makes sure that business is discussed at the various dinners,and that the entertainment is on the same day as the meetings with customers.Steven is reimbursed $2,000 by his employer under an accountable plan.Steven's AGI for the year is $50,000,and while he itemizes deductions,he has no other miscellaneous itemized deductions.What is the amount and character of Steven's deduction after any limitations?

Martin Corporation granted a nonqualified stock option to employee Caroline on January 1,2013.The option price was $150,and the FMV of the Martin stock was also $150 on the grant date.The option allowed Caroline to purchase 1,000 shares of Martin stock.The option itself does not have a readily ascertainable FMV.Caroline exercised the option on August 1,2017,when the stock's FMV was $250.If Caroline sells the stock on September 5,2018,for $300 per share,she must recognize

The following individuals maintained offices in their home: (1)Dr.Austin is a self-employed surgeon who performs surgery at four hospitals.He uses his home for administrative duties as he does not have an office in any of the hospitals. (2)June,who is a self-employed plumber,earns her living in her customer's homes.She maintains an office at home where she bills clients and does other paperwork related to her plumbing business. (3)Cassie,who is an employee of Montgomery Electrical,is provided an office at the workplace but does significant administrative work at home.Her employer does not require her to do extra work but she feels it is necessary in order to properly do her job. Who is entitled to a home office deduction?

An employee has unreimbursed travel and business auto expenses.In order to claim the deduction,the employee will report the details (amounts and type of expenditure)on Schedule A (Itemized Deductions)of Form 1040.

Which of the following statements regarding independent contractors and employees is true?

Kim currently lives in Buffalo and works in Rochester,a 60-mile commute each way.Kim accepts a new job in a town outside of Rochester,and the new commute is 75-miles each way.Kim decides the commute for the new job is too long,and she moves to Rochester.Kim is eligible to deduct her moving expenses.

Educational expenses incurred by a bookkeeper for courses necessary to sit for the CPA exam are fully deductible.

All of the following are true with regard to a Roth IRA except

Which of the following statements is correct regarding limitations on employer's contributions to qualified retirement plans in 2017?

The key distinguishing factor for classifying a worker as either an employee or self-employed includes the right to control and direct the worker with respect to both the end result and the means to accomplish that end result.

An employer adopts a per diem policy for hotel and meal travel reimbursements for employees,following the IRS tables.Employees will no longer have to submit any documentation.