Exam 25: Employee Expenses and Deferred Compensation

Deferred compensation refers to methods of compensating employees based upon their current service where the benefits are deferred until future periods.

Corporations issuing incentive stock options receive a tax deduction for compensation expense.

Gayle,a doctor with significant investments in the stock market,traveled on a cruise ship to Bermuda.Investment specialists provided daily seminars which Gayle attended.The cost of the cruise for four days is $2,500.Gayle can deduct (before application of any floors)

Hunter retired last year and will receive annuity payments for life from his employer's qualified retirement plan of $30,000 per year starting this year.During his years of employment,Hunter contributed $130,000 to the plan.Based on IRS tables,his life expectancy is 260 months.All of the contributions were on a pre-tax basis.This year,Hunter will include what amount in income?

Shane,an employee,makes the following gifts,none of which are reimbursed: What amount of the gifts is deductible before application of the 2% of AGI floor for miscellaneous itemized deductions?

Sarah incurred employee business expenses of $5,000 consisting of $3,000 business meals and $2,000 customer entertainment.She provided an adequate accounting to her employer's accountable plan and received reimbursement for one-half of the total expenses.How much of the meals and entertainment will be deductible by Sarah without consideration of the 2% of AGI limit?

Allison,who is single,incurred $4,000 for unreimbursed employee expenses,$10,000 for mortgage interest and real estate taxes on her home,and $500 for investment counseling fees.Allison's AGI is $80,000.Allison's allowable deductions from AGI are (after limitations have been applied)

Generally,50% of the cost of business gifts is deductible up to $25 per donee per year.

Jordan,an employee,drove his auto 20,000 miles this year,15,000 to meetings with clients and 5,000 for commuting and personal use.The cost of operating the auto for the year was as follows: Jordan submitted appropriate reports to his employer,and the employer paid a reimbursement of $ .50 per mile.Jordan has used the actual cost method in the past.Jordan's AGI is $50,000.What is Jordan's deduction for the use of the auto after application of all relevant limitations?

Travel expenses related to foreign conventions are disallowed unless the meeting is directly related to the taxpayer's business or is employment related,and it is reasonable for the meeting to be held outside of North America.

If an employee incurs business-related entertainment expenses that are fully reimbursed,it is the employer who is subject to the 50% limitation.