Question 1

A worker may prefer to be treated as an independent contractor (rather than an employee) for which of the following reasons:

Accepted Answer

A)  Avoids the overall limitation (50%) as to business meals. 
B)  All of the self-employment tax is deductible for income tax purposes. 
C)  Work-related expenses of an independent contractor are deductible for AGI. 
D)  A Schedule C does not have to be filed. 
E)  None of these. 
A)  Avoids the overall limitation (50%) as to business meals. 
B)  All of the self-employment tax is deductible for income tax purposes. 
C)  Work-related expenses of an independent contractor are deductible for AGI. 
D)  A Schedule C does not have to be filed. 
E)  None of these.

Question 2

For the spousal IRA provision to apply, a joint return must be filed.

Accepted Answer

A) True 
 B)False

Question 3

Sammy, age 31, is unmarried and is not an active participant in a qualified retirement plan. His modified AGI is $55,000 in 2018. The maximum amount that Sammy can deduct for a contribution to a traditional IRA is:

Accepted Answer

A)  $2,800. 
B)  $3,500. 
C)  $5,000. 
D)  $5,500. 
E)  None of the above. 
A)  $2,800. 
B)  $3,500. 
C)  $5,000. 
D)  $5,500. 
E)  None of the above.

Question 4

Marvin lives with his family in Alabama. He has two jobs: one in Alabama and one in North Carolina. Marvin's tax home is where he lives (Alabama).

Accepted Answer

A) True 
 B)False

Question 5

A worker may prefer to be classified as an employee (rather than an independent contractor) for which of the following reasons:

Accepted Answer

A)  To claim unreimbursed work-related expenses as a deduction for AGI. 
B)  To avoid the self-employment tax. 
C)  To avoid the overall limitation (50%) on unreimbursed business entertainment expenses. 
D)  To avoid the limitations on unreimbursed work-related expenses. 
E)  None of these. 
A)  To claim unreimbursed work-related expenses as a deduction for AGI. 
B)  To avoid the self-employment tax. 
C)  To avoid the overall limitation (50%) on unreimbursed business entertainment expenses. 
D)  To avoid the limitations on unreimbursed work-related expenses. 
E)  None of these.

Question 6

Under the actual cost method, which, if any, of the following expenses will not be allowed?

Accepted Answer

A)  Car registration fees. 
B)  Auto insurance. 
C)  Interest expense on a car loan (taxpayer is an employee). 
D)  Dues to auto clubs. 
E)  All of these will be allowed. 
A)  Car registration fees. 
B)  Auto insurance. 
C)  Interest expense on a car loan (taxpayer is an employee). 
D)  Dues to auto clubs. 
E)  All of these will be allowed.

Question 7

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

Accepted Answer

A)  No depreciation on the personal residence has to be computed. 
B)  The exclusive use requirement does not have to be met. 
C)  Allows the expense to be classified as a deduction for AGI. 
D)  Can also be used for a residence that is rented (not owned) by the taxpayer. 
E)  None of these. 
A)  No depreciation on the personal residence has to be computed. 
B)  The exclusive use requirement does not have to be met. 
C)  Allows the expense to be classified as a deduction for AGI. 
D)  Can also be used for a residence that is rented (not owned) by the taxpayer. 
E)  None of these.

Question 8

In which of the following plans is this statement true: A deduction is allowed for contributions to the plan, and no income tax consequences result from distributions to the participant at retirement.

Accepted Answer

A)  Roth IRAs. 
B)  Traditional IRAs. 
C)  Keogh (H.R. 10) plans. 
D)  Both b. and c., but not a. 
E)  None of the above. 
A)  Roth IRAs. 
B)  Traditional IRAs. 
C)  Keogh (H.R. 10) plans. 
D)  Both b. and c., but not a. 
E)  None of the above.

Question 9

An individual is considered an active participant in an employer-sponsored retirement plan merely because an individual's spouse is an active participant for any part of a plan year in applying the IRA phase-out provision.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Jana has $225,000 of earned income in 2018. Calculate the amount she can contribute to a SEP.

Accepted Answer

A)  $22,500 
B)  $24,500 
C)  $55,000 
D)  $56,250 
E)  None of the above 
A)  $22,500 
B)  $24,500 
C)  $55,000 
D)  $56,250 
E)  None of the above

Question 12

Under the deemed substantiation method of accounting for expenses, what is the maximum amount taxpayers are allowed as a deduction without being required to substantiate the amount of the expenses?

Accepted Answer

A)  The appropriate Federal per diem amount. 
B)  $75 per day. 
C)  All expenses up to $25 per day. 
D)  The per diem rate established by the state in which they live. 
E)  None of the above. 
A)  The appropriate Federal per diem amount. 
B)  $75 per day. 
C)  All expenses up to $25 per day. 
D)  The per diem rate established by the state in which they live. 
E)  None of the above.

Question 13

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

Accepted Answer

A)  Regardless of the amount of a taxpayer's MAGI. 
B)  To cover room and board expenses to attend college. 
C)  To a married taxpayer filing a separate return. 
D)  Even if a taxpayer does claim the standard deduction. 
E)  None of these. 
A)  Regardless of the amount of a taxpayer's MAGI. 
B)  To cover room and board expenses to attend college. 
C)  To a married taxpayer filing a separate return. 
D)  Even if a taxpayer does claim the standard deduction. 
E)  None of these.

Question 14

Both traditional and Roth IRAs possess the advantage of tax-free accumulation of income within the plan.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following expenses, if any, qualify as deductible in 2018?

Accepted Answer

A)  Contribution to a Roth IRA. 
B)  Costs involved in maintaining an office in the home by a self-employed insurance adjuster. Taxpayer's wife also uses the office as a meeting place for her bridge club. 
C)  Cost of moving to first job location. Taxpayer just graduated from college. 
D)  Job hunting expenses of a fishing guide to become an insurance salesman. 
E)  None of the above. 
A)  Contribution to a Roth IRA. 
B)  Costs involved in maintaining an office in the home by a self-employed insurance adjuster. Taxpayer's wife also uses the office as a meeting place for her bridge club. 
C)  Cost of moving to first job location. Taxpayer just graduated from college. 
D)  Job hunting expenses of a fishing guide to become an insurance salesman. 
E)  None of the above.

Question 16

Regarding the simplified method of computing the office in the home deduction, comment on the following independent factors.
a. Taxpayer has set aside 400 square feet for use as an office.
b. Taxpayer has repainted and recarpeted the office area.
c. In past years, taxpayer has always taken the deduction using the regular (actual expense) method.
d. The net income from the business is not large.

Accepted Answer

a. Unfortunately, the deduction is limit

Question 17

Madison and Christopher are staff accountants at a major public accounting firm. Both are pursuing a law degree in a night program at local law school. Madison contends that the cost of the program is a deduction for income tax purposes, while Christopher maintains that it is not. Who is correct and why?

Accepted Answer

Both are partly correct and incorrect. T

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

After the automatic mileage rate has been set by the IRS for a year, it cannot later be changed by the IRS.

Accepted Answer

A) True 
 B)False

Question 20

When is a taxpayer's work assignment in a new locale temporary? Permanent? What difference does it make?

Accepted Answer

Temporary indicates that the assignment'

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

A worker may prefer to be treated as an independent contractor (rather than an employee) for which of the following reasons:

For the spousal IRA provision to apply, a joint return must be filed.

Sammy, age 31, is unmarried and is not an active participant in a qualified retirement plan. His modified AGI is $55,000 in 2018. The maximum amount that Sammy can deduct for a contribution to a traditional IRA is:

Marvin lives with his family in Alabama. He has two jobs: one in Alabama and one in North Carolina. Marvin's tax home is where he lives (Alabama).

A worker may prefer to be classified as an employee (rather than an independent contractor) for which of the following reasons:

Under the actual cost method, which, if any, of the following expenses will not be allowed?

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

In which of the following plans is this statement true: A deduction is allowed for contributions to the plan, and no income tax consequences result from distributions to the participant at retirement.

An individual is considered an active participant in an employer-sponsored retirement plan merely because an individual's spouse is an active participant for any part of a plan year in applying the IRA phase-out provision.

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

Jana has $225,000 of earned income in 2018. Calculate the amount she can contribute to a SEP.

Under the deemed substantiation method of accounting for expenses, what is the maximum amount taxpayers are allowed as a deduction without being required to substantiate the amount of the expenses?

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

Both traditional and Roth IRAs possess the advantage of tax-free accumulation of income within the plan.

Which of the following expenses, if any, qualify as deductible in 2018?

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

After the automatic mileage rate has been set by the IRS for a year, it cannot later be changed by the IRS.

When is a taxpayer's work assignment in a new locale temporary? Permanent? What difference does it make?

An Introduction to Taxation and Understanding the Federal Tax Law

Working with the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: In General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

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