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

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Question 1

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A deduction for parking and other traffic violations incurred during business use of an automobile is allowed under the actual cost method but not the automatic mileage method.

A) True
B) False

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Question 2

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Which of the following miscellaneous expenses is deductible?

A) Unreimbursed employee business expenses.
B) Job-hunting expenses.
C) Union dues.
D) Losses from Ponzi-type investment schemes.
E) All of these expenses are miscellaneous itemized deductions.

F) A) and E)
G) A) and D)

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Question 3

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A taxpayer who claims the standard deduction may be able to claim an office in the home deduction.

Fran is a CPA who has a small tax practice in addition to working as the controller for a local manufacturing business.Fran runs her tax practice out of a 150-square foot office in her home where she meets clients and works on their tax returns and researches their tax issues.She meets the exclusive use test for this space.The gross income from her tax practice amounts to $7,500 for the year.Business expenses amount to $1,000.Based on square footage, $4,000 of Fran's mortgage interest and real estate taxes are allocable to the home office.The allocable portion of maintenance, utilities, and depreciation is $4,500.Assuming no other expenses related to the business were incurred, what amount of the maintenance, utilities, and depreciation is deductible by Fran?

Which of the following trips, if any, will qualify for the travel expense deduction?

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.

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

Under the right circumstances, a taxpayer's meals and lodging expense can qualify as a deductible education expense.

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

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 self-employed taxpayer who uses the automatic mileage method to compute auto expenses can also deduct the business portion of automobile club dues.

If an individual is subject to the direction or control of another only to the extent of the end result but not as to the means of accomplishment, an employer-employee relationship does not exist.

A taxpayer who always claims the standard deduction (i.e., does not itemize his or her deductions from AGI) may still be able to receive a tax benefit from any education expenses incurred.

One of the purposes of the qualified business income deduction was to reduce the taxes on businesses that are operating in noncorporate business forms (e.g., sole proprietors, partnerships, and S corporations).

During the year, Sophie (a self-employed marketing consultant) went from Omaha to Lima, Peru, on business.She spent four days on business, two days on travel, and four days on vacation.Disregarding the vacation costs, Sophie's expenses are: $\begin{array} { l r } \text { Airfare } & \$ 3,000 \\\text { Lodging } & 800 \\\text { Meals } & 600 \\\text { Entertainment } & 400\end{array}$ Sophie's deductible expenses are:

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 for these gifts.

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.

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

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 § 222 deduction for tuition and related expenses is available: