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

Lloyd,a practicing CPA,pays tuition to attend law school.Since a law degree involves education leading to a new trade or business,the tuition is not deductible.

Logan,Caden,and Olivia are three unrelated parties who claim the standard deduction.All are married and attend Citron University and each pays tuition of $6,100.Of this payment,Logan can claim a deduction of $4,000;Caden a deduction of $2,000;and Olivia no deduction at all.Explain.

Bob lives and works in Newark,NJ.He travels to London for a three-day business meeting,after which he spends three days touring Scotland.All of his air fare is deductible.

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

Which,if any,of the following is an advantage of using the simplified method for determining the office in the home deduction?

A moving expense deduction is allowed even if at the time of the move the taxpayer did not have a job at the new location.

Tracy,the regional sales director for a manufacturer of exercise equipment,pays $2,500 to rent a skybox for a visiting performance of the Harlem Globetrotters.The skybox holds 10 seats,and Tracy invites 7 clients to the event.Nonluxury seats range in price from $80 to $120.The refreshments provided during the event cost $600.If Tracy meets all of the requirements for deductibility (i.e. ,business discussion,substantiation),she may deduct:

Dana contributes $2,000 too much to a § 401(k) plan which is not returned within 2 1/2 months after the close of the tax year.The employer will have to pay a tax of $200.

If a taxpayer does not own a home but rents an apartment,the office in the home deduction is not available.

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 -Cutback adjustment does not apply

Under the right circumstances,a taxpayer's meals and lodging expense can qualify as a deductible education 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 -Education expense that is not deductible to maintain or improve existing skills

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.

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

If a married taxpayer is an active participant in another qualified retirement plan,the traditional IRA deduction phaseout begins at $98,000 of AGI for a joint return in 2015.

Flamingo Corporation furnishes meals at cost to its employees by means of a cafeteria it maintains.The cost of operating the cafeteria is not subject to the cutback adjustment.

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 -Automatic mileage method

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 does not work for other parties.

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 -Distance test (for moving expenses) not satisfied

When contributions are made to a traditional IRA,they are deductible by the participant.Later distributions from the IRA upon retirement are fully taxed.