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

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Question 71

True/False

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Tired of renting, Dr. Smith buys the academic robes she will wear at her college's graduation procession. The cost of this attire does not qualify as a uniform expense.

A) True
B) False

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Question 72

Multiple Choice

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Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. -Sue was trained by Lynn.

A) Indicates employee status.
B) Indicates independent contractor status.

C) A) and B)
D) undefined

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Question 73

Multiple Choice

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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: $\begin{array}{llr} \text { Air fare} &\$3,200\\ \text { Lodging } &900\\ \text { Meals} &800\\ \text { Entertainment } &600\\\end{array}$ Presuming no reimbursement, deductible expenses are:

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

A taxpayer just changed jobs and incurred unreimbursed moving expenses. a. What are his (or her) options if an income tax return has to be filed before the time test is met? b. What happens if the moving expense deduction has been claimed and the time test is not later satisfied?

After graduating from college, Clint obtained employment in Omaha. In moving from his parents' home in Baltimore to Omaha, Clint incurred the following expenses: $\begin{array}{lr}\text { Transportation } & \$ 700 \\\text { Meals } & 380 \\\text { Lodging } & 400 \\\text { Cost of moving household goods } & 3,500\end{array}$ a. How much may Clint deduct as moving expense? b. Would any deduction be allowed if Clint claimed the standard deduction for the year of the move? Explain.

Match the statements that relate to each other. (Note: Choice L may be used more than once.) -Keogh (H.R. 10) plans

Match the statements that relate to each other. (Note: Choice L may be used more than once.) -Characteristic of a taxpayer who has the status of an employee

Under the automatic mileage method, one rate does not cover every type of expense. For 2014, what are the rates for business use, education, moving, charitable, and medical?

Match the statements that relate to each other. (Note: Choice L may be used more than once.) -Deemed substantiation

A taxpayer who claims the standard deduction will not avoid the 2% floor on unreimbursed employee expenses.

Eileen lives and works in Mobile. She travels to Rome for an eight-day business meeting, after which she spends two days touring Italy. All of Eileen's airfare is deductible.

Once set for a year, when might the IRS change the rate for the automatic mileage method?

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.

The IRS will issue advanced rulings as to whether a worker's status is that of an employee or an independent contractor.

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:

Lloyd, a practicing CPA, pays tuition to attend law school. Since a law degree involves education leading to a new trade or business, the tuition is not deductible.

Jacob is a landscape architect who works out of his home. He wonders whether or not he will have nondeductible commuting expenses when he drives to the locations of his clients. Please comment.

In terms of income tax treatment, what is the difference between common law and statutory employees?

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.