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

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Question 51

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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 helpers.

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Question 52

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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 nondeductible personal travel expense.

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Question 53

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Christopher just purchased an automobile for $40,000 which he plans to claim 100% as being for business use.In order to take advantage of MACRS and § 179,he plans to use the actual cost method for determining his deduction in the first year.In subsequent years,he will switch to the automatic mileage method.Comment on Christopher's proposed approach.

Under the simplified method,the maximum office in the home deduction allowed is the greater of $1,500 or the office square feet × $5.

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.

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. ) a.Must involve the same trade or business b.Must be for the convenience of the employer c.Meals while in route d.Lodging while in route e.Out-of-town job assignment lasts for more than one year f.Can include actual cost of parking g.Payment for services rendered based on tasks performed h.Excludes use of MACRS depreciation i.Taxpayer has tools and helper provided for him j.Transportation must be allocated if taxpayer spends two weeks on business and one week sightseeing k.Paralegal obtains a law degree l.Correct match not provided -Mixed use (both business and pleasure) foreign travel

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.

Match the statements that relate to each other.(Note: Choice L may be used more than once. ) a.Must involve the same trade or business b.Must be for the convenience of the employer c.Meals while in route d.Lodging while in route e.Out-of-town job assignment lasts for more than one year f.Can include actual cost of parking g.Payment for services rendered based on tasks performed h.Excludes use of MACRS depreciation i.Taxpayer has tools and helper provided for him j.Transportation must be allocated if taxpayer spends two weeks on business and one week sightseeing k.Paralegal obtains a law degree l.Correct match not provided -Characteristic of a taxpayer who is self-employed

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.

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. The floor space of Rocky's residence is 2,500 square feet,and he estimates that 20% of this is devoted exclusively to the repair business (i.e. ,500 square feet).Gross income from the business is $13,000,while expenses (other than home office) are $5,000.Expenses relating to the residence are as follows: Real property taxes $4,500 Interest on home mortgage 8,000 Operating expenses of residence 3,000 Depreciation (based on 20% business use) 1,000 What is Rocky's net income from the repair business ​ a.If he uses the regular (actual expense) method of computing the deduction for office in the home? b.If he uses the simplified method?

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.

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

Noah moved from Delaware to Arizona to accept a better job.He incurred the following unreimbursed moving expenses: ​ Transportation $3,000 Lodging 400 Meals in route 500 Penalty for breaking apartment lease 1,000 Forfeiture of athletic club membership 500 Moving company cost 7,000 ​ What is Noah's moving expense deduction?

Jake performs services for Maude.If Maude provides the helper and tools,this is indicative of independent contractor (rather than employee) status.

An education expense deduction may be allowed even if the education results in a promotion or pay raise for the employee.

Frank,a recently retired FBI agent,pays job search expenses to obtain a position with a city police department.Frank's job search expenses do qualify as deductions.

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 files a Schedule SE with her Form 1040.

A taxpayer who uses the automatic mileage method to compute auto expenses can also deduct the business portion of tolls and parking.

Ashley and Matthew are husband and wife and both are practicing CPAs.On a joint return,Ashley gets to deduct her professional dues but Matthew does not.Explain.