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Exam 11: Individuals As Employees and Proprietors

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Question 51

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

A) True
B) False

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Question 52

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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.

A) True
B) False

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Question 53

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Only self-employed individuals are required to make estimated tax payments.

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

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?

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.

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) .Disregarding the 2%-of-AGI limitation, as to the MBA program, Rachel has a:

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.

How are combined business/pleasure trips treated for travel within the United States as opposed to foreign travel?

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.

Cathy takes five key clients to a nightclub and incurs the following costs: $320 limousine rental, $460 cover charge, $920 drinks and dinner, and $200 tips.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?

Evaluate the following statements: I. De minimis fringe benefits are those that are so immaterial that accounting for them is impractical. II. De minimis fringe benefits are subject to strict anti-discrimination requirements. III. Generally, a fringe benefit of less than $50 is considered de minimis and can be excluded from gross income. ?

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

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 meals) } &\$1,020\\ \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 boss) } &400\\\end{array}$ ? How much of these expenses are allowed as deductions from AGI?

Robert entertains several of his key clients on January 1 of the current year.Expenses paid by Robert are as follows: $\begin{array} { l r } \text { Cab fare } & \$ 60 \\\text { Cover charge at supper club } & 200 \\\text { Dinner at club } & 800 \\\text { Tips to waiter } & 160\end{array}$ ? Presuming proper substantiation, Robert's deduction is:

Match the statements that relate to each other.(Note: Choice L may be used more than once.) -Actual cost method of determining car expense

The exclusion for health insurance premiums paid by the employer applies to:

Employees of the Valley Country Club are allowed to use the golf course without charge before and after working hours on Mondays, when the number of players on the course is at its lowest.Tom, an employee of the country club played 40 rounds of golf during the year at no charge when the non-employee charge was $20 per round.

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.

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.