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Exam 11: Individuals As Employees and Proprietors

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Question 41

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In some cases it may be appropriate for a taxpayer to deduct work-related expenses as both a sole proprietor and an employee.

A) True
B) False

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Question 42

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Under the regular actual expense) method, the portion of the office in the home deduction that exceeds the income from the business can be carried over to future years.

A) True
B) False

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Question 43

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A taxpayer who lives and works in Tulsa travels to Buffalo for five days.If three days are spent on business and two days are spent on visiting relatives, only 60% of the airfare is deductible.

The CEO of Cirtronics Inc., discovered that the company's competitor had adopted a cafeteria plan for its employees.The CEO is concerned about retaining his talented employees and would like you to provide a brief explanation as to why a cafeteria plan may be attractive to the company's employees.

Heather is a full-time employee of the Drake Company and participates in the company's flexible spending plan that is available to all employees.Which of the following is correct?

A "qualified trade or business" includes any trade or business including providing services as an employee.

Roger is in the 35% marginal tax bracket.Roger's employer has created a flexible spending account for medical and dental expenses that are not covered by the company's health insurance plan.Roger had his salary reduced by $1,200 during the year for contributions to the flexible spending plan.However, Roger incurred only $1,100 in actual expenses for which he was reimbursed.Under the plan, he must forfeit the $100 unused amount.His after-tax cost of overfunding the plan is $65.

The exclusion for health insurance premiums paid by the employer applies to:

Janet works at Green Company's call center.If Janet's compensation is based on the number of calls she handles, she is an independent contractor.

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

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.

Jackson gives his supervisor and her husband each a $30 box of chocolates at Christmas.Jackson may claim only $25 as a deduction.

Carla is a deputy sheriff.Her employer requires that she live in the county where she is employed.Housing is very expensive; so the county agreed to pay her $4,800 per year to cover the higher cost of housing.Carla must include the housing supplement in her gross income.

Ethan, a bachelor with no immediate family, uses the Pine Shadows Country Club exclusively for his business entertaining.All of Ethan's annual dues for his club membership are deductible.

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

There are three limitations on the qualified business income deduction.An overall limitation based on modified taxable income), another that applies to high income taxpayers, and a third that applies to certain types of services businesses.

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

Melody works for a company with only 22 employees.Her employer contributed $2,000 to her health savings account HSA), and the account earned $100 in interest during the year.Melody withdrew only $1,200 to pay medical expenses during the year.Melody is not required to recognize any gross income from the HSA for the year.

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) .As to the MBA program, Rachel has a:

Employees of the Valley Country Club are allowed to use the golf course without charge before and after working hours on Mondays, when the number of players on the course is at its lowest.Tom, an employee of the country club played 40 rounds of golf during the year at no charge when the non-employee charge was $20 per round.