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

Question 1

A taxpayer who maintains an office in the home to conduct his only business will not have nondeductible commuting expense.

Answer 1

True

Question 2

Jake performs services for Maude. If Maude provides a helper and tools, this is indicative of independent contractor (rather than employee) status.

Answer 2

False

Question 3

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

Answer 3

True

Question 4

A statutory employee is not a common law employee but is subject to Social Security tax.

Question 5

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.

Question 6

Amy lives and works in St. Louis. In the morning she flies to Boston, has a three-hour business meeting, and returns to St. Louis that evening. For tax purposes, Amy was away from home.

Question 7

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

Question 8

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

Question 9

For tax purposes, a statutory employee is treated the same as a common law employee.

Question 10

If an individual is subject to the direction or control of another only to the extent of the end result but not as to the means of accomplishment, an employer-employee relationship does not exist.

Question 11

James has a job that compels him to go to many different states during the year. It is possible that James was never away from his tax home during the year.

Question 12

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).

Question 13

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

Question 14

After she finishes working at her main job, Ann returns home, has dinner, then drives to her second job. Ann may deduct the mileage between her first and second job.

Question 15

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

Question 16

In some cases it may be appropriate for a taxpayer to report work-related expenses by using both Form 2106 and Schedule C.

Question 17

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

Question 18

The work-related expenses of an independent contractor will be subject to the 2%-of-AGI floor.

Question 19

One indicia of independent contractor (rather than employee) status is when the individual performing the services is paid based on time spent (rather than on tasks performed).

Question 20

A deduction for parking and other traffic violations incurred during business use of the automobile is allowed under the actual cost method but not the automatic mileage method.

Question 21

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

Question 22

In November 2017, Katie incurs unreimbursed moving expenses to accept a new job. Katie cannot deduct any of these expenses when she timely files her 2017 income tax return since she has not yet satisfied the 39-week time test.

Question 23

An education expense deduction may be allowed even if the education results in a promotion or pay raise for the employee.

Question 24

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.

Question 25

In May 2017, after 11 months on a new job, Ken is fired after he assaults a customer. Ken must include in his gross income for 2017 any deduction for moving expenses he may have claimed on his 2016 tax return.

Question 26

A taxpayer who lives and works in Kansas City is sent to Chicago on an eight-day business trip. While in Chicago, taxpayer uses the hotel valet service to have some laundry done. The valet charge is a nondeductible personal travel expense.

Question 27

A moving expense deduction is allowed even if at the time of the move the taxpayer did not have a job at the new location.

Question 28

There is no cutback adjustment for meals and entertainment as to employees who are subject to regulation by the U.S. Department of Transportation.

Question 29

At age 65, Camilla retires from her job in Boston and moves to Florida. As a retiree, she is not subject to the time test in deducting her moving expenses.

Question 30

Sick of her 65 mile daily commute, Edna purchases a condo that is only four miles from her job. Edna's moving expenses to her new condo are not allowed and cannot be claimed by her as a deduction.

Question 31

Lloyd, a practicing CPA, pays tuition to attend law school. Since a law degree involves education leading to a new trade or business, the tuition is not deductible.

Question 32

Liam just graduated from college. Because it is his first job, the cost of moving his personal belongings from his parents' home to the job site does not qualify for the moving expense deduction.

Question 33

After completing an overseas assignment in Oslo (Norway), Daniel retires from Pelican Corporation and moves to a retirement community in Key West (Florida). Daniel's moving expenses from Oslo to Key West are deductible as they are exempt from the time test.

Question 34

The tax law specifically provides that a taxpayer cannot be temporarily away from home for any period of employment that exceeds one year.

Question 35

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.

Question 36

Qualified moving expenses include the cost of lodging but not meals during the move.

Question 37

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

Question 38

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.

Question 39

Qualified moving expenses of an employee that are not reimbursed are a deduction for AGI.

Question 40

Eileen lives and works in Mobile. She travels to Rome for an eight-day business meeting, after which she spends two days touring Italy. All of Eileen's airfare is deductible.

Question 41

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

Question 42

Under the simplified method, the maximum office in the home deduction allowed is the greater of $1,500 or the office square feet × $5.

Question 43

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

Question 44

Mallard Corporation pays for a trip to Aruba for its two top salespersons. This expense is subject to the cutback adjustment.

Question 45

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

Question 46

On their birthdays, Lily sends gift certificates (each valued at $25) to Caden (a key client) and to each of Caden's two minor children. Lily can deduct only $25 as to these gifts.

Question 47

After graduating from college with a degree in chemistry, Alberto obtains a job as a chemist with DuPont. Alberto's job search expenses qualify as deductions.

Question 48

Flamingo 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.

Question 49

A taxpayer takes six clients to an NBA playoff game. If all of the tickets (list price of $120 each) are purchased on the Internet for $1,800 ($300 each), only $60 ($120 × 50% cutback adjustment) per ticket is deductible.

Question 50

Ethan, a bachelor with no immediate family, uses the Pine Shadows Country Club exclusively for his business entertaining. All of Ethan's annual dues for his club membership are deductible.

Question 51

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

Question 52

Jackson gives his supervisor and her husband each a $30 box of chocolates at Christmas. Jackson may claim only $25 as a deduction.

Question 53

Frank, a recently retired FBI agent, pays job search expenses to obtain a position with a city police department. Frank's job search expenses do qualify as deductions.

Question 54

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.

Question 55

Tired of renting, Dr. Smith buys the academic robes she will wear at her college's graduation procession. The cost of this attire does not qualify as a uniform expense.

Question 56

Qualifying job search expenses are deductible even if the taxpayer does not change jobs.

Question 57

Travis holds rights to a skybox (containing 10 seats) at Memorial Stadium which he uses to entertain key clients. At one sporting event, he took only six clients since three were ill. Even so, Travis may still deduct the appropriate cost of all ten seats.

Question 58

For tax year 2016, Taylor used the simplified method of determining her office in the home deduction. For 2017, Taylor must continue to use the simplified method and cannot switch to the regular (actual expense) method.

Question 59

Under the regular (actual expense) method, the portion of the office in the home deduction that exceeds the income from the business can be carried over to future years.

Question 60

In the case of an office in the home deduction, the exclusive business use test does not apply when the home is used as a daycare center.

Question 61

Amy works as an auditor for a large major CPA firm. During the months of September through November of each year, she is permanently assigned to the team auditing Garnet Corporation. As a result, every day she drives from her home to Garnet and returns home after work. Mileage is as follows: ​
For these three months, Amy's deductible mileage for each workday is:

A)0.
B)30.
C)35.
D)60.
E)None of these.

Question 62

Allowing for the cutback adjustment (50% reduction for meals and entertainment), which of the following trips, if any, will qualify for the travel expense deduction?

A)Dr. Jones, a general dentist, attends a two-day seminar on developing a dental practice.
B)Dr. Brown, a surgeon, attends a two-day seminar on financial planning.
C)Paul, a romance language high school teacher, spends summer break in France, Portugal, and Spain improving his language skills.
D)Myrna went on a two-week vacation in Boston. While there, she visited her employer's home office to have lunch with former co-workers.
E)All of these.

Question 63

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

Question 64

A taxpayer who claims the standard deduction will not avoid the 2%-of-AGI floor on unreimbursed employee expenses.

Question 65

Dave is the regional manager for a national chain of auto-parts stores and is based in Salt Lake City. When the company opens new stores in Boise, Dave is given the task of supervising their initial operation. For three months, he works weekdays in Boise and returns home on weekends. He spends $350 returning to Salt Lake City but would have spent $410 had he stayed in Boise for the weekend. As to the weekend trips, how much, if any, qualifies as a deduction?

A)$0, since the trips are personal and not work related.
B)$0, since Dave's tax home has changed from Salt Lake City to Boise.
C)$60
D)$350
E)$410

Question 66

When using the automatic mileage method, which, if any, of the following expenses also can be claimed?

A)Engine tune-up.
B)Parking.
C)Interest on automobile loan.
D)MACRS depreciation.
E)None of these.

Question 67

Employees who render an adequate accounting to the employer and are fully reimbursed will shift the 50% cutback adjustment to their employer.

Question 68

Aiden performs services for Lucas. Which, if any, of the following factors indicate that Aiden is an employee, rather than an independent contractor?

A)Aiden provides his own support services (e.g., work assistants).
B)Aiden obtained his training (i.e., job skills) from his father.
C)Aiden is paid based on hours worked.
D)Aiden makes his services available to others.
E)None of these.

Question 69

For self-employed taxpayers, travel expenses are not subject to the 2%-of-AGI floor.

Question 70

Aaron is a self-employed practical nurse who works out of his home. He provides nursing care for disabled persons living in their residences. During the day he drives his car as follows. ​
Aaron's deductible mileage for each workday is:

A)10 miles.
B)12 miles.
C)20 miles.
D)22 miles.
E)32 miles.

Question 71

Statutory employees:

A)Report their expenses on Form 2106.
B)Include common law employees.
C)Are subject to income tax withholdings.
D)Claim their expenses as deductions for AGI.
E)None of these.

Question 72

In which, if any, of the following situations is the automatic mileage available?

A)A limousine to be rented by the owner for special occasions (e.g., weddings, high school proms).
B)The auto belongs to taxpayer's mother.
C)One of seven cars used to deliver pizzas.
D)MACRS statutory percentage method has been claimed on the automobile.
E)None of these.

Question 73

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

Question 74

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

A)Avoids the cutback adjustment as to business meals.
B)All of the self-employment tax is deductible for income tax purposes.
C)Work-related expenses are not subject to the 2%-of-AGI floor.
D)A Schedule C does not have to be filed.
E)None of these.

Question 75

By itself, credit card receipts will not constitute adequate substantiation for travel expenses.

Question 76

Which, if any, of the following factors is not a characteristic of independent contractor status?

A)Work-related expenses are reported on Form 2106.
B)Receipt of a Form 1099 reporting payments received.
C)Workplace fringe benefits are not available.
D)Services are performed for more than one party.
E)None of these.

Question 77

Corey is the city sales manager for "RIBS," a national fast food franchise. Every working day, Corey drives his car as follows: ​
Corey's deductible mileage is:

A)0 miles.
B)50 miles.
C)66 miles.
D)76 miles.
E)None of these.

Question 78

Jordan performs services for Ryan. Which, if any, of the following factors indicate that Jordan is an independent contractor, rather than an employee?

A)Ryan sets the work schedule.
B)Ryan provides the tools used.
C)Jordan files a Form 2106 with his Form 1040.
D)Jordan is paid based on tasks performed.
E)None of these.

Question 79

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

A)To claim unreimbursed work-related expenses as a deduction for AGI.
B)To avoid the self-employment tax.
C)To avoid the cutback adjustment on unreimbursed business entertainment expenses.
D)To avoid the 2%-of-AGI floor on unreimbursed work-related expenses.
E)None of these.

Question 80

Under the actual cost method, which, if any, of the following expenses will not 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.