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Exam 17: Individuals As Employees and Proprietors

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Question 81

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Meg's employer carries insurance on its employees that will pay an employee his or her regular salary while the employee is away from work due to illness.The premiums for Meg's coverage were $1,800.Meg was absent from work for two months as a result of a kidney infection.Meg's employer's insurance company paid Meg's regular salary of $8,000 while she was away from work.Meg also collected $2,000 on a wage continuation policy she had purchased.Meg must include $11,800 in her gross income.

A) True
B) False

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Question 82

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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.

A) True
B) False

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Question 83

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The portion of the office in the home deduction that exceeds the income from the business can be carried over to future years.

Julie was suffering from a viral infection that caused her to miss work for 90 days.During the first 30 days of her absence,she received her regular salary of $8,000 from her employer.For the next 60 days,she received $12,000 under an accident and health insurance policy purchased by her employer.The premiums on the health insurance policy were excluded from her gross income.During the last 30 days,Julie received $6,000 on an income replacement policy she had purchased.Of the $26,000 she received,Julie must include in gross income:

Lily went from her office in Portland to Lisbon 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:

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) : Presuming no reimbursement,Walt's deductible expenses are:

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

A U.S.citizen worked in a foreign country for the period July 1,2012 through August 1,2013.Her salary was $10,000 per month.Also,in 2012 she received $5,000 in dividends from foreign corporations (not qualified dividends) .No dividends were received in 2013.Which of the following is correct?

A taxpayer who maintains an office in the home to conduct his only business will not have nondeductible commuting expense.

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.

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

Adam repairs power lines for the Egret Utilities Company.He is generally working on a power line during the lunch hour.He must eat when and where he can and still get his work done.He usually purchases something at a convenience store and eats in his truck.Egret reimburses Adam for the cost of his meals.

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

During the year,John 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:

Once the actual cost method is used,a taxpayer cannot change to the automatic mileage method in a later year.

The First Chance Casino has gambling facilities,a bar,a restaurant,and a hotel.All employees are allowed to obtain food from the restaurant at no charge during working hours.In the case of the employees who operate the gambling facilities,bar,and restaurant,60% of all of Casino's employees,the meals are provided for the convenience of the Casino.However,the hotel workers,demanded equal treatment and therefore were also allowed to eat in the restaurant at no charge while they are at work.Which of the following is correct?

Fresh Bakery often has unsold donuts at the end of the day.The bakery allows employees to take the leftovers home.The employees are not required to recognize gross income because the bakery does not incur any additional cost.

The Perfection Tax Service gives employees $12.50 as "supper money" when they are required to work overtime,approximately 25 days each year.The supper money received:

During the year,Sophie went from Omaha to Lima (Peru) on business.She spent four days on business,two days on travel,and four days on vacation.Disregarding the vacation costs,Sophie's unreimbursed expenses are: Sophie's deductible expenses are:

Sarah's employer pays the hospitalization insurance premiums for a policy that covers all employees and retired former employees.After Sarah retires,the hospital insurance premiums paid for her by her employer can be excluded from her gross income.