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

Alexis (a CPA and JD)sold her public accounting practice in Des Moines and accepted a job with the Seattle office of a national law firm.Her moving expenses are not deductible because she has changed employment status (i.e. ,went from self-employed to employee)and changed occupations (i.e. ,practice of public accounting to practice of law).

Mallard 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.

The maximum annual contribution to a Roth IRA for an unmarried taxpayer who is age 35 is the smaller of $5,000 or the individual's compensation for the year.

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

Edna lives and works in Cleveland.She travels to Berlin for a nine-day business meeting,after which she spends four days touring Germany.All of Edna's airfare is deductible.

Madison is an instructor of fine arts at a local community college.If she spends $600 on art supplies for her classes,none of this amount can be claimed as a deduction for AGI.

A sole proprietor is not allowed a deduction for a $25 gift he gives to his office manager on her birthday.

If only one spouse is employed,both spouses (ages 34 and 39)may contribute a maximum of $5,000 to an IRA in 2010 if the employed spouse has compensation of at least $10,000.

Xijia establishes a Roth IRA at age 34 and contributes the maximum amount per year to the Roth IRA for 32 years.The account is now worth $282,000,consisting of $128,000 in contributions plus $154,000 in accumulated earnings.How much can Xijia withdraw tax free in 2010?

Once the actual cost method is used,a taxpayer cannot for a later year change to the automatic mileage method.

A participant,who is age 38,in a cash or deferred arrangement plan [§ 401(k)] may contribute up to what amount in 2010?

Regarding tax favored retirement plans for employees and self-employed persons,comment on the following:

A taxpayer who claims the standard deduction will not be able to claim an office in the home deduction.

Tired of her 60 mile daily commute,Margaret purchases a condo that is only five miles from her job.Margaret's moving expenses to her new condo are allowed and can be claimed by her as a deduction.

Some transactions can qualify as either business entertainment or as a business gift.In such cases,the business entertainment classification usually predominates.However,in one situation a choice between the two is allowed.Explain.

One of the tax advantages of being self-employed (rather than being an employee)is:

Concerning the deduction for moving expenses,what circumstances,if any,will excuse a taxpayer from meeting the time test of 39 or 78 weeks?

Which of the following expenses,if any,qualify as deductible?

Which,if any,of the following expenses is subject to the 2%-of-AGI floor?

A participant has an adjusted basis of $0 in any nondeductible contributions to a traditional IRA.