Question 1

Which, if any, of the following expenses are deductible?

Accepted Answer

A)  Safety shoes purchased by an plumber employed by a company. 
B)  Bottled water purchased by a gig driver for passengers. 
C)  Unreimbursed employee expenses. 
D)  Tax return preparation fee paid by a non-employed retiree. 
E)  None of these. 
A)  Safety shoes purchased by an plumber employed by a company. 
B)  Bottled water purchased by a gig driver for passengers. 
C)  Unreimbursed employee expenses. 
D)  Tax return preparation fee paid by a non-employed retiree. 
E)  None of these.

Question 2

For tax year 2018, Taylor used the simplified method of determining her office in the home deduction. For 2019, Taylor must continue to use the simplified method and cannot switch to the regular (actual expense) method.

Accepted Answer

A) True 
 B)False

Question 3

Travel status requires that the taxpayer be away from home overnight.
a. What does "away from home overnight" mean?
b. What tax advantages result from being in travel status?

Accepted Answer

a. "Home" for this purpose is the place

Question 4

A participant, who is age 38, in a cash or deferred arrangement plan [§ 401(k)] may contribute up to what amount in 2018?

Accepted Answer

A)  $12,000 
B)  $17,000 
C)  $17,500 
D)  $18,500 
E)  None of the above 
A)  $12,000 
B)  $17,000 
C)  $17,500 
D)  $18,500 
E)  None of the above

Question 5

Under the automatic mileage method, depreciation is not taken into account in the mileage rate allowed.

Accepted Answer

A) True 
 B)False

Question 6

Mary establishes a Roth IRA at age 50 and contributes the maximum amount per year to the Roth IRA for 15 years. The account is now worth $199,000, consisting of $75,000 in contributions plus $124,000 in accumulated earnings. How much can Mary withdraw tax-free?

Accepted Answer

A)  $0 
B)  $75,000 
C)  $124,000 
D)  $199,000 
E)  None of the above 
A)  $0 
B)  $75,000 
C)  $124,000 
D)  $199,000 
E)  None of the above

Question 7

A taxpayer who always claims the standard deduction (i.e., does not itemize his or her deductions from AGI) may still be able to receive a tax benefit from any education expenses incurred.

Accepted Answer

A) True 
 B)False

Question 8

Tax advantages of being self-employed (rather than being an employee) include:

Accepted Answer

A)  The self-employment tax is lower than the Social Security tax. 
B)  The overall limitation (50%) on meals does not apply. 
C)  An office in the home deduction (for AGI) is available. 
D)  Job-related expenses are deductions for AGI. 
E)  Both c. and d. are advantages. 
A)  The self-employment tax is lower than the Social Security tax. 
B)  The overall limitation (50%) on meals does not apply. 
C)  An office in the home deduction (for AGI) is available. 
D)  Job-related expenses are deductions for AGI. 
E)  Both c. and d. are advantages.

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

Under the right circumstances, a taxpayer's meals and lodging expense can qualify as a deductible education expense.

Accepted Answer

A) True 
 B)False

Question 11

Rod uses his automobile for both business and personal use and claims the automatic mileage rate for all purposes.
During 2018, his mileage was as follows:
   
How much can Rod claim for mileage?

Accepted Answer

$5,330 [(8,800 miles × $0.545,

Question 12

An individual, age 40, who is not subject to the phase-out provision may contribute a nondeductible amount to a Roth IRA up to $5,500 per year in 2018.

Accepted Answer

A) True 
 B)False

Question 13

During the year, Sophie (a self-employed marketing consultant) went from Omaha to Lima (Peru) on business. She spent four days on business, two days on travel, and four days on vacation. Disregarding the vacation costs, Sophie's expenses are:  
Sophie's deductible expenses are:

Accepted Answer

A)  $4,300. 
B)  $2,900. 
C)  $2,800. 
D)  $2,500. 
E)  None of these. 
A)  $4,300. 
B)  $2,900. 
C)  $2,800. 
D)  $2,500. 
E)  None of these.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

The IRS will issue advanced rulings as to whether a worker's status is that of an employee or an independent contractor.

Accepted Answer

A) True 
 B)False

Question 16

A taxpayer who lives and works in Tulsa travels to Buffalo for five days. If three days are spent on business and two days are spent on visiting relatives, only 60% of the airfare is deductible.

Accepted Answer

A) True 
 B)False

Question 17

Cathy takes five key clients to dinner and incurs the following costs: $320 limousine rental, $920 drinks and dinner, and $200 tips? assume that there were substantive business discussions during dinner. Several days after the function, Cathy mails each client a pen costing $25. In addition, Cathy pays $4 for gift wrapping and mailing each pen. Assuming adequate substantiation and a business justification, what is Cathy's deduction?

Accepted Answer

$1,025. $320 + [($920 + $200) × 50%] = $

Question 18

In choosing between the actual expense method and the automatic mileage method, a taxpayer should consider the cost of insurance on the automobile.

Accepted Answer

A) True 
 B)False

Question 19

Every year, Teal Corporation gives each employee a turkey and a bottle of wine at the December holiday season.
These gifts are subject to the 50% limitation.

Accepted Answer

A) True 
 B)False

Question 20

Janet works at Green Company's call center. If Janet's compensation is based on the number of calls she handles, she is an independent contractor.

Accepted Answer

A) True 
 B)False

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

Which, if any, of the following expenses are deductible?

For tax year 2018, Taylor used the simplified method of determining her office in the home deduction. For 2019, Taylor must continue to use the simplified method and cannot switch to the regular (actual expense) method.

Travel status requires that the taxpayer be away from home overnight. a. What does "away from home overnight" mean? b. What tax advantages result from being in travel status?

A participant, who is age 38, in a cash or deferred arrangement plan [§ 401(k)] may contribute up to what amount in 2018?

Under the automatic mileage method, depreciation is not taken into account in the mileage rate allowed.

Mary establishes a Roth IRA at age 50 and contributes the maximum amount per year to the Roth IRA for 15 years. The account is now worth $199,000, consisting of $75,000 in contributions plus $124,000 in accumulated earnings. How much can Mary withdraw tax-free?

A taxpayer who always claims the standard deduction (i.e., does not itemize his or her deductions from AGI) may still be able to receive a tax benefit from any education expenses incurred.

Tax advantages of being self-employed (rather than being an employee) include:

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.

Under the right circumstances, a taxpayer's meals and lodging expense can qualify as a deductible education expense.

Rod uses his automobile for both business and personal use and claims the automatic mileage rate for all purposes. During 2018, his mileage was as follows: How much can Rod claim for mileage?

An individual, age 40, who is not subject to the phase-out provision may contribute a nondeductible amount to a Roth IRA up to $5,500 per year in 2018.

During the year, Sophie (a self-employed marketing consultant) went from Omaha to Lima (Peru) on business. She spent four days on business, two days on travel, and four days on vacation. Disregarding the vacation costs, Sophie's expenses are: Sophie's deductible expenses are:

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

The IRS will issue advanced rulings as to whether a worker's status is that of an employee or an independent contractor.

A taxpayer who lives and works in Tulsa travels to Buffalo for five days. If three days are spent on business and two days are spent on visiting relatives, only 60% of the airfare is deductible.

In choosing between the actual expense method and the automatic mileage method, a taxpayer should consider the cost of insurance on the automobile.

Every year, Teal Corporation gives each employee a turkey and a bottle of wine at the December holiday season. These gifts are subject to the 50% limitation.

Janet works at Green Company's call center. If Janet's compensation is based on the number of calls she handles, she is an independent contractor.

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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