Question 1

Sam retired last year and will receive annuity payments for life from his employer's qualified retirement plan of $30,000 per year starting this year.During his years of employment,Sam contributed $130,000 to the plan on an after-tax basis.Based on IRS tables,his life expectancy is 260 months.This year,Sam will include what amount in income?

Accepted Answer

A) 0 
B) $6,000 
C) $24,000 
D) $30,000

Question 2

Daniel has accepted a new job and is reviewing the retirement plan information.He has a choice of participating in the company's conventional Sec.401(k)plan or a Roth 401(k)plan.Explain the difference between the two plans in terms of employee contributions and retirement distributions from the plan.

Accepted Answer

The answer of Daniel has accepted a new job and...

Question 3

Gwen traveled to New York City on a business trip for her employer.Gwen spent 4 days in business meetings and conferences and then spent 2 days sightseeing in the area.Gwen's plane fare for the trip was $250.Meals cost $160 per day.Hotels and other incidental expenses amounted to $250 per day.Gwen was not reimbursed by her employer for any expenses.Her AGI for the year is $50,000 and she itemizes but has no other miscellaneous itemized deductions.Gwen may deduct (after limitations)

Accepted Answer

A) $570. 
B) $890. 
C) $1,890. 
D) $1,570.

Question 4

Alex is a self-employed dentist who operates a qualifying office in his home.Alex has $180,000 gross income from his practice and $160,000 of expenses directly related to the business,i.e.,non-home office expenses.Alex's allocable home office expenses for mortgage interest expenses and property taxes are $14,000 and other home office expenses are $9,000.What is Alex's total allowable home office deduction?

Accepted Answer

A) $9,000 
B) $14,000 
C) $20,000 
D) $23,000

Question 5

Feng,a single 40 year old lawyer,is covered by a qualified retirement at work.His salary is $109,000,and his total AGI is $125,000.The maximum contribution he can make to a Roth IRA in 2015 is

Accepted Answer

A) 0) 
B) $3,300. 
C) $2,200. 
D) $5,500.

Question 6

Rajiv,a self-employed consultant,drove his auto 20,000 miles this year,15,000 to meetings with clients and 5,000 for commuting and personal use.The cost of operating the auto for the year was as follows:  Rajiv's AGI is $100,000 before considering the auto costs.Rajiv has used the actual cost method in the past.What is Rajiv's deduction for the use of the auto after application of all relevant limitations?

Accepted Answer

A) $8,325 
B) $9,000 
C) $6,325 
D) $7,000

Question 7

Johanna is single and self-employed as a technology consultant.She wants to set money aside for her retirement.What tax and financial issues should she consider?

Accepted Answer

The answer of Johanna is single and self-employed as a...

Question 8

Allison,who is single,incurred $4,000 for unreimbursed employee expenses,$10,000 for mortgage interest and real estate taxes on her home,and $500 for investment counseling fees.Allison's AGI is $80,000.Allison's allowable deductions from AGI are (after limitations have been applied)

Accepted Answer

A) $10,500. 
B) $12,900. 
C) $14,000. 
D) $14,500.

Question 9

All taxpayers are allowed to contribute funds to Health Savings Accounts to supplement their health insurance.

Accepted Answer

A) True 
 B)False

Question 10

Steven is a representative for a textbook publishing company.Steven attends a convention which will also be attended by many potential customers.During the week of the convention,Steven incurs the following costs in entertaining potential customers.  Having recently been to a company seminar on tax laws,Steven makes sure that business is discussed at the various dinners,and that the entertainment is on the same day as the meetings with customers.Steven is reimbursed $2,000 by his employer under an accountable plan.Steven's AGI for the year is $50,000,and while he itemizes deductions,he has no other miscellaneous itemized deductions.What is the amount and character of Steven's deduction after any limitations?

Accepted Answer

A) $500 from AGI 
B) $500 for AGI 
C) $2,000 from AGI 
D) $2,000 for AGI

Question 11

If the purpose of a trip is primarily personal and only secondarily related to business,the transportation costs to and from the destination are deductible.

Accepted Answer

A) True 
 B)False

Question 12

A nondeductible floor of 2% of AGI is imposed on unreimbursed employee business expenses,investment expenses,and many other miscellaneous itemized deductions such as tax preparation fees.

Accepted Answer

A) True 
 B)False

Question 13

An employer-employee relationship exists where the employer has the right to control and direct the individual providing services with regard to the end result and the means by which the result is accomplished.

Accepted Answer

A) True 
 B)False

Question 14

Mirasol Corporation granted an incentive stock option to employee Josephine two years ago.The option price was $150 and the FMV of the Mirasol stock was also $150 on the grant date.The option allowed Josephine to purchase 160 shares of Mirasol stock.Josephine exercised the option this year when the stock's FMV was $250.Unless otherwise stated,assume Josephine is a qualifying employee.The results of the above transactions to Mirasol Corporation will be

Accepted Answer

A) no compensation deduction. 
B) a compensation deduction of $16,000 on the grant date. 
C) a tax preference item of $16,000 on the exercise date. 
D) a compensation deduction of $16,000 on the exercise date.

Question 15

Jason,who lives in New Jersey,owns several apartment buildings in Baltimore.His travel expenses to Baltimore to inspect his property are tax deductible.

Accepted Answer

A) True 
 B)False

Question 16

A taxpayer goes out of town to a business convention.The 50% reduction applies to the cost of food,entertainment and transportation expenses.

Accepted Answer

A) True 
 B)False

Question 17

Which statement is correct regarding SIMPLE retirement plans?

Accepted Answer

A) SIMPLE plans are not subject to nondiscrimination rules. 
B) This plan can only be adopted by employers with 50 or fewer employees. 
C) Only the employer can contribute to the plan. 
D) Employer contributions must vest within three years.

Question 18

Dues paid to social or athletic clubs are deductible if they meet a primary-use test,requiring that more than 50% of the use of the facility be for business purposes.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following situations will disqualify a taxpayer from taking a deduction for moving expenses?

Accepted Answer

A) Pam moves from Phoenix to Los Angeles to take a new job.She works at the Los Angeles job for 45 weeks before starting a new job in Las Vegas. 
B) Paul moves from Boston to Miami to start a new business selling t-shirts.The business is not successful and Paul returns to Boston after 52 weeks. 
C) Phyllis opens a coffee bar after moving from Seattle to San Francisco.She still owns the coffee bar and lives in San Francisco 90 weeks after her move. 
D) Marva moves from Dallas to Washington D.C.in her job as an IRS agent.She is still working at the IRS Washington office after one year.

Question 20

Ross works for Houston Corporation,which has a contributory defined contribution pension plan.The employer's monthly contribution to the plan is 8 percent of each participating employee's monthly salary,while the employee contributes only 6 percent.Ross's monthly salary is $3,000.Which of the following statements best describes the benefits of the plan?

Accepted Answer

A) Houston receives a deduction for its contributions to the plan when Ross receives a distribution from the plan. 
B) While Ross is taxed on the employer's contributions to the plan,his own contributions are not taxed until he receives a distribution from the plan. 
C) Ross may deduct his own contributions to the pension plan,and Ross reports income from the plan each year until he receives distributions from the plan. 
D) The amounts contributed to the plan and the earnings on those contributions are not taxed to Ross until he retires or receives a distribution from the plan.

Exam 18: Employee Expenses and Deferred Compensation

Feng,a single 40 year old lawyer,is covered by a qualified retirement at work.His salary is $109,000,and his total AGI is $125,000.The maximum contribution he can make to a Roth IRA in 2015 is

Johanna is single and self-employed as a technology consultant.She wants to set money aside for her retirement.What tax and financial issues should she consider?

Allison,who is single,incurred $4,000 for unreimbursed employee expenses,$10,000 for mortgage interest and real estate taxes on her home,and $500 for investment counseling fees.Allison's AGI is $80,000.Allison's allowable deductions from AGI are (after limitations have been applied)

All taxpayers are allowed to contribute funds to Health Savings Accounts to supplement their health insurance.

If the purpose of a trip is primarily personal and only secondarily related to business,the transportation costs to and from the destination are deductible.

A nondeductible floor of 2% of AGI is imposed on unreimbursed employee business expenses,investment expenses,and many other miscellaneous itemized deductions such as tax preparation fees.

An employer-employee relationship exists where the employer has the right to control and direct the individual providing services with regard to the end result and the means by which the result is accomplished.

Jason,who lives in New Jersey,owns several apartment buildings in Baltimore.His travel expenses to Baltimore to inspect his property are tax deductible.

A taxpayer goes out of town to a business convention.The 50% reduction applies to the cost of food,entertainment and transportation expenses.

Which statement is correct regarding SIMPLE retirement plans?

Dues paid to social or athletic clubs are deductible if they meet a primary-use test,requiring that more than 50% of the use of the facility be for business purposes.

Which of the following situations will disqualify a taxpayer from taking a deduction for moving expenses?