Exam 18: Employee Expenses and Deferred Compensation

Hannah is a 52-year-old an unmarried taxpayer who is not an active participant in an employer-sponsored qualified retirement plan.Before IRA contributions,her AGI is $63,000 in 2014.What is the maximum amount she may contribute to a tax deductible IRA?

Tyne is a 48-year-old an unmarried taxpayer who is not an active participant in an employer-sponsored qualified retirement plan.Before IRA contributions,her AGI is $63,000 in 2014.What is the maximum amount she may contribute to a tax deductible IRA?

Martin Corporation granted a nonqualified stock option to employee Caroline on January 1,2011. 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 1,2014 when the stock's FMV was $250. Caroline sells the stock on September 5,2015 for $300 per share. Martin Corporation will be allowed a deduction of

A taxpayer goes out of town to a business convention. The 50% reduction applies to the cost of food,entertainment and transportation expenses.

Mirasol Corporation granted an incentive stock option to employee Josephine two years ago.The option price was $150 and the FMV of the Mirasol stock was also $150 on the grant date.The option allowed Josephine to purchase 160 shares of Mirasol stock.Josephine exercised the option this year when the stock's FMV was $250.Unless otherwise stated,assume Josephine is a qualifying employee.The results of the above transactions to Mirasol Corporation will be

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

An employer receives an immediate tax deduction for pension and profit-sharing contributions made on behalf of employees.

Rajiv,a self-employed consultant,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: Rajiv's AGI is $100,000 before considering the auto costs. Rajiv has used the actual cost method in the past. What is Rajiv's deduction for the use of the auto after application of all relevant limitations?

A gift from an employee to his or her superior does not qualify as a business gift.

In a contributory defined contribution pension plan,all of the following are true with the exception of

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 to make a down payment on a new car.What are the tax consequences to Jack?

All of the following are allowed a "For AGI" deduction except:

Jackson Corporation granted an incentive stock option to employee Caroline on January 1,two years ago.The option price was $150,and the FMV of the Jackson stock was also $150 on the grant date.The option allowed Caroline to purchase 160 shares of Jackson stock.Caroline exercised the option on August 1,2013,when the stock's FMV was $250.Unless otherwise stated,assume Caroline is a qualifying employee.If Caroline sells the stock on July 5,2014 for $400 per share,she must recognize

Charles is a self-employed CPA who maintains a qualifying office in his home.Charles has $110,000 gross income from his practice and incurs $88,000 in salaries,supplies,computer services,etc.Charles's mortgage interest and real estate taxes allocable to the office total $10,000.Other expenses total $14,000 and consist of depreciation,utilities,insurance,and maintenance.What is Charles' total home office expense deduction?

All of the following may deduct education expenses except:

Sarah purchased a new car at the beginning of the year. She makes an adequate accounting to her employer and receives a $2,400 (12,000 miles × 20 cents per mile)reimbursement in 2014 for employment-related business miles.She incurs the following expenses related to both business and personal use: She also spent $200 on parking and tolls that were related to business.During the year she drove a total 20,000 miles. What are the possible amounts of Sarah's deductible transportation expenses?

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?

Which of the following statements regarding Coverdell Education Savings Accounts is incorrect,disregarding any AGI limits?

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

In-home office expenses are deductible if the office is used exclusively on a regular basis as the principal place of business for any trade or business of the taxpayer.