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

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Question 91

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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.

A) True
B) False

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Question 92

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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.

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Question 93

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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).

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.

Paul is employed as an auditor by a CPA firm. On most days, he commutes by auto from his home to the office. During one month, however, he has an extensive audit assignment closer to home. For this engagement, Paul drives directly from home to the client's premises and back. Mileage information is summarized below: Home to office 12 miles Office to audit client 15 miles Audit client to home 10 miles If Paul spends 20 days on the audit, what is his deductible mileage?

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

Under the actual cost method, which, if any, of the following expenses will not be allowed?

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. -Sue uses her own tools.

In November 2014, Katie incurs unreimbursed moving expenses to accept a new job. Katie cannot deduct any of these expenses when she timely files her 2014 income tax return since she has not yet satisfied the 39-week time test.

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.

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.

Susan is a self-employed accountant with a qualified defined contribution plan (a Keogh plan) . She has the following income items for the year: $\begin{array}{lr}\text { Earned income from self-employment } & \$ 50,000 \\\text { Dividend income } & 8,000 \\\text { Interest income } & 2,000 \\\text { Net short-term capital gain } & 12,000 \\\text { Adjusted gross income } & \$ 72,000\end{array}$ What is the maximum amount Susan can deduct as a contribution to her retirement plan in 2014, assuming the self- employment tax rate is 15.3%?

The § 222 deduction for tuition and related expenses is available:

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. $\begin{array}{lr}&\text { Miles }\\\text { Aaron's home to patient Louise } & 12 \\\text { Patient Louise to patient Carl } & 4 \\\text { Patient Carl to patient Betty } & 6 \\\text { Patient Betty to Aaron's home } & 10\end{array}$ Aaron's deductible mileage for each workday is:

Nicole just retired as a partner in a Philadelphia law firm. She moved to San Francisco where she took a job as an adjunct professor at a local law school. Can Nicole deduct her moving expenses? Explain

Meredith holds two jobs and attends graduate school on weekends. The education improves her skills, but does not qualify her for a new trade of business. Before going to the second job, she returns home for dinner. Relevant mileage is as follows? Home to first job ^{9 miles} First job to second job ^{13 miles} Home to second job ^{15 miles} Home to university ^{7 miles} How much of the mileage qualifies for deduction purposes?

For the spousal IRA provision to apply, a joint return must be filed.

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

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.

Discuss the 2%-of-AGI floor and the 50% cutback 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.