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

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Question 31

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Which of the following would constitute an employer-employee relationship?

A) A plumber who comes to your home to fix a leaking faucet.
B) A CPA who prepares a client's tax return.
C) A physician who hires a nurse to help her with patient screening and preliminary tests in the office.
D) A gardener who takes care of individual lawns for a monthly fee.
E) None of the above would constitute an employer-employee relationship.

F) B) and D)
G) A) and B)

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Question 32

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A self-employed taxpayer who uses the automatic mileage method to compute auto expenses can also deduct the business portion of automobile club dues.

A) True
B) False

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Question 33

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During the year, John (a self-employed management consultant) went from Milwaukee to Alaska on business. Preceding a five-day business meeting, he spent four days vacationing at the beach. Excluding the vacation costs, his expenses for the trip are: Presuming no reimbursement, deductible expenses are:

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

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.

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. a. Indicates employee status. b. Indicates independent contractor status. -Lynn determines when the services are to be performed.

Discuss the 50% overall limitation in connection with various employee expenses under the following arrangements: a. The employee is not reimbursed by the employer. b. The employee is fully reimbursed under a nonaccountable plan. c. The employee is partially reimbursed under an accountable plan. d. The employee is fully reimbursed under an accountable plan.

Rachel is single and has a college degree in finance. She is employed as a loan officer at a bank? her yearly AGI approximates $50,000. During the year, she enrolled in a weekend MBA program and incurred the following nonreimbursed expenses: $4,100 (tuition) , $300 (books) , $200 (other school supplies) , and $200 (transportation to and from campus) . As to the MBA program, Rachel has a:

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. a. Indicates employee status. b. Indicates independent contractor status. -Sue files a Schedule SE with her Form 1040.

Joyce, age 40, and Sam, age 42, who have been married for seven years, are both active participants in qualified retirement plans. Their total AGI for 2018 is $130,000. Each is employed and earns a salary of $65,000. What are their combined deductible contributions to traditional IRAs?

Lily (self-employed) went from her office in Portland to Lisbon, Portugal on business. While there, she spent part of the time on vacation. How much of the air fare of $5,000 can she deduct based on the following assumptions: a. Lily was gone five days (i.e., three business and two personal). b. Lily was gone five weeks (i.e., four business and one personal). c. Lily was gone five weeks (i.e., three business and two personal).

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

One indicator 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).

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: What is Alfredo's deductible expense for the trip?

The maximum annual contribution to a Roth IRA for an unmarried taxpayer who is age 35 is the smaller of $5,500 or the individual's compensation for the year in 2018.

Statutory employees:

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

Logan, Caden, and Olivia are three unrelated parties who claim the standard deduction. All are married and attend Citron University and each pays tuition of $6,100. Of this payment, Logan can claim a deduction of $4,000? Caden a deduction of $2,000? and Olivia no deduction at all. Explain.

If a married taxpayer is an active participant in another qualified retirement plan, the traditional IRA deduction phaseout begins at $101,000 of AGI for a joint return in 2018.

A self-employed taxpayer who lives and works in Kansas City travels 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.