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

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Question 51

Multiple Choice

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Tracy, the regional sales director for a manufacturer of exercise equipment, pays $2,500 to rent a skybox for a visiting performance of the Harlem Globetrotters. The skybox holds 10 seats, and Tracy invites 7 clients to the event. Nonluxury seats range in price from $80 to $120. The refreshments provided during the event cost $600. If Tracy meets all of the requirements for deductibility (i.e., business discussion, substantiation) , she may deduct:

A) $900.
B) $1,100.
C) $1,260.
D) $1,500.
E) $1,550.

F) A) and C)
G) None of the above

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Question 52

Multiple Choice

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Match the statements that relate to each other. (Note: Choice L may be used more than once.) -Nondeductible moving expense

A) Must involve the same trade or business
B) Must be for the convenience of the employer
C) Meals while in route
D) Lodging while in route
E) Out-of-town job assignment lasts for more than one year
F) Can include actual cost of parking
G) Payment for services rendered based on tasks performed
H) Excludes use of MACRS depreciation
I) Taxpayer has tools and helper provided for him
J) Transportation must be allocated if taxpayer spends two weeks on business and one week sightseeing
K) Paralegal obtains a law degree
L) Correct match not provided

M) A) and C)
N) F) and I)

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Question 53

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For the current year, Wilbur is employed as a deputy sheriff of a county. He has AGI of $50,000 and the following unreimbursed employee expenses: $\begin{array}{llr} \text { Attendance at a law enforcement conference ( \$ 800 for travel and \( \$ 220 \) for } &\$1,020\\ \text { meals) } &\\ \text {Uniforms (does not include \( \$ 300 \) for laundry and dry cleaning) } &1,000\\ \text { Professional dues and journals } &300\\ \text {Contribution to sheriff's reelection campaign (highly recommended by Wilbur's } &400\\ \text { boss) } &\\\end{array}$

During the year, Walt travels from Seattle to Tokyo (Japan) on business. His time was spent as follows: 2 days travel (one day each way) , 2 days business, and 2 days personal. His expenses for the trip were as follows (meals and lodging reflect only the business portion) : $\begin{array}{ll}\text { Arr fare } & \$ 3,000 \\\text { Lodging } & 2,000 \\\text { Meals and entertainment } & 1,000\end{array}$ Presuming no reimbursement, Walt's deductible expenses are:

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.

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

Match the statements that relate to each other. (Note: Choice L may be used more than once.) -Mixed use (both business and pleasure) foreign travel

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?

Match the statements that relate to each other. (Note: Choice L may be used more than once.) -Club dues deductible

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

Alfredo, a self-employed patent attorney, flew from his home in Chicago to Miami, had lunch alone at the airport, conducted business in the afternoon, and returned to Chicago in the evening. His expenses were as follows: $\begin{array}{llr} \text {Airfare } &\$900\\ \text {Airport parking (Chicago) } &60\\ \text { Lunch } &30\\ \text { Taxis (Miami) } &42\\\end{array}$ What is Alfredo's deductible expense for the trip?

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

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.

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

Regarding the new 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.

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

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.

Due to a merger, Allison transfers from Miami to Chicago. Under a new job description, she is reclassified from employee to independent contractor status. Her moving expenses, which are not reimbursed, are as follows: $\begin{array}{ll}\text {Transportation}& \$ 1,400\\\text {Meals}&400\\\text { Lodging } & 500 \\\text { Cost of moving household goods } & 4,000 \\\text { Penalty for breaking lease on Miami apartment } & 3,000\end{array}$ Allison's deductible moving expense is: A) $\$ 0$ . B) $\$ 5,900$ C) $\$ 6,100$ . D) $\$ 8,900$ . E) $\$ 9.300$

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?

In terms of IRS attitude, what do the following expenses have in common? a. Cost of a CPA exam review course. b. Cost of a review course for the bar exam. c. Cost of a law degree by a taxpayer who does not intend to practice law.