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

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Question 61

Multiple Choice

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A worker may prefer to be classified as an employee (rather than an independent contractor) for which of the following reasons:

A) To claim unreimbursed work-related expenses as a deduction for AGI.
B) To avoid the self-employment tax.
C) To avoid the cutback adjustment on unreimbursed business entertainment expenses.
D) To avoid the 2%-of-AGI floor on unreimbursed work-related expenses.
E) None of the above.

F) B) and D)
G) C) and E)

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Question 62

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

A) True
B) False

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Question 63

Multiple Choice

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Which of the following expenses,if any,qualify as deductible?

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

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.

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?

During the year,Oscar travels from Raleigh to Moscow (Russia) 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,Oscar's deductible expenses are:

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

At age 65,Camilla retires from her job in Boston and moves to Florida.As a retiree,she is not subject to the time test in deducting her moving expenses.

Qualified moving expenses include the cost of lodging but not meals during the move.

Rocky has a full-time job as an electrical engineer for the city utility.In his spare time,Rocky repairs TV sets in the basement of his personal residence.Most of his business comes from friends and referrals from former customers,although occasionally he runs an ad in the local suburbia newspaper.Typically,the sets are dropped off at Rocky's house and later picked up by the owner when notified that the repairs have been made.

Arnold is employed as an assistant manager in the furniture division of a national chain of department stores.He is a recent college graduate with a degree in marketing.During 2012,he enrolls in the evening MBA program of a local university and incurs the following expenses: tuition,$4,200; books and computer supplies,$800; transportation expense to and from the university,$450; and meals while on campus,$400.Arnold is single and his annual AGI is $66,000.As to these expenses,what are Arnold's:

Elaine,the regional sales director for a manufacturer of exercise equipment,pays $2,500 to rent a skybox for a visiting performance of the Harlem Globetrotters.The skybox holds 10 seats,and Elaine invites 7 clients to the event.Nonluxury seats range in price from $80 to $120.The refreshments provided during the event cost $600.If Elaine meets all of the requirements for deductibility (i.e.,business discussion,substantiation) ,she may deduct:

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

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

Edna lives and works in Cleveland.She travels to Berlin for an eight-day business meeting,after which she spends four days touring Germany.All of Edna's airfare is deductible.

Which,if any,of the following expenses is subject to the 2%-of-AGI floor?

Dove Corporation pays for a trip to Jamaica for its two top salespersons.This expense is not subject to the cutback adjustment.

Marvin lives with his family in Alabama.He has two jobs: one in Alabama and one in North Carolina.Marvin's tax home is where he lives (Alabama).

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.