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

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Question 61

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

A) Only if the taxpayer itemizes deductions from AGI.
B) To deduct that portion of the tuition in excess of that allowed under the lifetime learning credit.
C) To cover the tuition of a son who does not qualify as taxpayer's dependent.
D) Only if job related.
E) None of these.

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

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Question 62

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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.

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a. It is the position of the IRS that th...

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Question 63

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Taylor performs services for Jonathan on a regular basis. There exists considerable doubt as to whether Taylor is an employee or an independent contractor. a. What can Jonathan do to clarify the matter? b. Suppose Jonathan treats Taylor as an independent contractor but Taylor thinks she is an employee. What is Taylor's recourse, if any?

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 uses her own tools.

Which, if any, of the following factors is a characteristic of independent contractor status?

Beginning in 2018, the moving expense deduction has been eliminated for all taxpayers.

Carol is self-employed and uses her automobile solely in her business. If she uses the actual expense method to compute expenses, she can include any interest paid on the loan taken out to purchase the car.

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. Aaron's deductible mileage for each workday is:

Meg teaches the fifth grade at a local school. During the year, she spends $1,200 for school supplies for use in her classroom. On her income tax return, some of this expense is not reported and the balance is deducted in two different places. Explain what has probably happened.

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

Employees who render an adequate accounting to the employer and are fully reimbursed will shift the 50% overall limitation on meal expenses to their employer.

By itself, credit card receipts will not constitute adequate substantiation for travel expenses.

For self-employed taxpayers, travel expenses are deductions for AGI.

In connection with the office in the home deduction of a self-employed individual, comment on the following: a. Mixed use (i.e., business and personal) of the portion of the home allocated to business. b. The difference between direct and indirect expenses for deduction purposes. c. The classification of the expense (i.e., dfor or dfrom AGI).

In contrasting the reporting procedures of employees and self-employed persons regarding job-related transactions, which of the following items involve self-employed?

Qualified moving expenses of an employee that are not reimbursed are a deduction for AGI.

In 2018, a taxpayer takes six clients to an NBA playoff game. If all of the tickets (list price of $120 each) are purchased on the Internet for $1,800 ($300 each), only $60 ($120 × 50% overall limitation) per ticket is deductible.

Fran is a CPA who has a small tax practice in addition to working as the controller for a local manufacturing business. Fran runs her tax practice out of a 150 square foot office in her home where she meets clients and works on their tax returns and researches their tax issues. She meets the exclusive use test for this space. The gross income from her tax practice amounts to $7,500 for the year. Business expenses amount to $1,000. Based on square footage, $4,000 of Fran's mortgage interest and real estate taxes are allocable to the home office. The allocable portion of maintenance, utilities, and depreciation is $4,500. Assuming no other expenses related to the business were incurred, what amount of the maintenance, utilities, and depreciation is deductible by Fran?

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 charges by the hour for her work.

Compare a § 401(k) plan with an IRA.