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

As Christmas presents,Lily sends gift certificates (each valued at $25)to Caden (a key client)and to each of his two minor children.Lily can deduct $75 (3 ´ $25)as to these gifts.

How are combined business/pleasure trips treated for travel within the United States as opposed to foreign travel?

Which,if any,of the following expenses are not subject to the 2%-of-AGI floor?

Faith just graduated from college and she needs advice on the tax treatment of the costs she incurs in connection with her first job (a loan officer at a bank).Specifically,she wants to know about the following items:

If the cost of uniforms is deductible,their maintenance cost (e.g.,laundry,dry cleaning,alterations)also is deductible.

Madison is an instructor of fine arts at a local community college.If she spends $600 (not reimbursed)on art supplies for her classes,$250 of this amount can be claimed as a deduction for AGI.

Carolyn is single and has a college degree in finance.She is employed as a loan officer at a bank; her yearly AGI approximates $50,000.During the year,she enrolled in a weekend MBA program and incurred the following nonreimbursed expenses: $3,900 (tuition),$300 (books),$200 (other school supplies),and $200 (transportation to and from campus).Disregarding the 2%-of-AGI limitation,as to the MBA program,Carolyn has a:

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.

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

A taxpayer who uses the automatic mileage method to compute auto expenses can also deduct the business portion of tolls and parking.

Brian makes gifts as follows: * Includes $2 for engraving Presuming adequate substantiation and no reimbursement,how much may Brian deduct?

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.

Tom owns and operates a lawn maintenance company.He does not concern himself with employment taxes because he considers all the persons who work for him to be independent contractors.He bases this assumption of the fact that several of his friends who operate similar businesses follow the same approach.Comment on Tom's situation.

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.

Janet,who lives and works in Newark,travels to Atlanta for a Thursday-Friday business conference.She stays over after the conference and visits relatives and friends on Saturday.Under certain circumstances,the meals and lodging expenses for Saturday can be considered as business related.

Jackson gives his supervisor a $30 box of chocolates on her birthday.Jackson may claim only $25 as a deduction.

A deduction for parking and other traffic violations is allowed under the actual cost method but not the automatic mileage method.

During the year,Oscar travels from Raleigh to Moscow (Russia)on business.His time was spent as follows: 2 days travel (one day each way),2 days business,and 2 days personal.His expenses for the trip were as follows (meals and lodging reflect only the business portion): Presuming no reimbursement,Oscar's deductible expenses are:

For tax purposes,"travel" is a broader classification than "transportation."

Kelly,an unemployed architect,moves from Boston to Phoenix to accept a job as a chef at a restaurant.Kelly's moving expenses are not deductible because her new job is in a different trade or business.