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

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Question 1

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A taxpayer who claims the standard deduction will not be able to claim an office in the home deduction.

A) True
B) False

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Question 2

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Both traditional and Roth IRAs possess the advantage of tax-free accumulation of income within the plan.

A) True
B) False

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Question 3

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

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).

When contributions are made to a traditional IRA,they are deductible by the participant.Later distributions from the IRA upon retirement are fully taxed.

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

In which,if any,of the following situations is the automatic mileage available?

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

Sue performs services for Lynn.Regarding this arrangement,use the legend provided to classify each statement. -Sue does not work for other parties.

Sue performs services for Lynn.Regarding this arrangement,use the legend provided to classify each statement. -Sue files a Form 2106 with her Form 1040.

Logan,Caden,and Olivia are three unrelated parties who claim the standard deduction.All are married and attend Citron University and each pays tuition of $6,100.Of this payment,Logan can claim a deduction of $4,000;Caden a deduction of $2,000;and Olivia no deduction at all.Explain.

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

The Federal per diem rates that can be used for "deemed substantiated" purposes are the same for all locations in the country.

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 2014,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 $64,000.As to these expenses,what are Arnold's: a.Deductions for AGI? b.Deductions from AGI?

Rod uses his automobile for both business and personal use and claims the automatic mileage rate for all purposes.During 2014,his mileage was as follows: $\begin{array}{lr}&\text { Miles Driven }\\\text { Personal } & 4,000 \\\text { Business } & 8,000 \\\text { Qualifying moving expense } & 3,500 \\\text { Medical } & 1,800 \\\text { Charitable } & 1,500 \\\text { Qualifving education (MBA program) } & 800\end{array}$ How much can Rod claim for mileage?

Felicia,a recent college graduate,is employed as an accountant by an oil company.She would like to continue her education and obtain a law degree.Discuss Felicia's tax status if she attends a local law school on a: a.Part-time basis. b.Full-time basis.

Which,if any,of the following expenses are not subject to the 2%-of-AGI floor?

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

Under the actual cost method,which,if any,of the following expenses will not be allowed?

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: 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?