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

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Question 41

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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.

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Question 42

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Dana contributes $2,000 too much to a § 401(k) plan which is not returned within 2 1/2 month after the close of the tax year. The employer will have to pay a tax of $200

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Question 43

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Gwen went to Paris on business.While there, she spent 60% of the time on business and 40% on vacation.How much of the air fare of $4,000 can she deduct based on the following assumptions:

A taxpayer who uses the automatic mileage method for the business use of an automobile can change to the actual cost method in a later year.

A direct transfer of funds from a qualified retirement plan to an IRA is not subject to the withholding rules.

Nick Lee is a linebacker for the Baltimore Ravens (a professional football club).During the football season he rents an apartment in a Baltimore suburb.The rest of the time he lives with his family in Ann Arbor (MI) and works at a local bank as a vice president in charge of public relations.Can Nick deduct his expenses while away from Ann Arbor? Explain.

A taxpayer who lives and works in Kansas City is sent to Chicago on an eight-day business trip.While in Chicago, taxpayer uses the hotel valet service to have some laundry done.The valet charge is a deductible travel expense.

Any pre-tax amount elected by an employee as a contribution to a § 401(k) plan that does not exceed the statutory limit is not includible in gross income in the year of deferral and is 100% vested.

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

In terms of meeting the distance test for purposes of deducting moving expenses, which of the following statements is correct?

Frank established a Roth IRA at age 25 and contributed a total of $131,244 to it over 38 years.The account is now worth $376,000.How much of these funds can Frank withdraw tax-free?

Employees who render an adequate accounting to the employer and are fully reimbursed will shift the 50% cutback adjustment to their employer.

Kay, a single individual, participates in her employer's SIMPLE § 401(k) plan.The plan permits participants to contribute a percentage of their salary.Kay elects to contribute 5% of her annual salary of $111,000 to the plan.On what amount of her salary does Kay pay income taxes in 2012?

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 deduction for parking and other traffic violations is allowed under the actual cost method but not the automatic mileage method.

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

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

An individual, age 40, who is not subject to the phase-out provision may contribute a deductible amount to a Roth IRA up to $5,000 per year in 2012.

How are combined business/pleasure trips treated for travel within the United States as opposed to foreign travel?

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.