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

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Question 21

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A worker may prefer to be treated as an independent contractor (rather than an employee) for which of the following reasons:

A) Avoids the overall limitation (50%) as to business meals.
B) All of the self-employment tax is deductible for income tax purposes.
C) Work-related expenses of an independent contractor are deductible for AGI.
D) A Schedule C does not have to be filed.
E) None of these.

F) A) and C)
G) C) and D)

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Question 22

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Under the deemed substantiation method of accounting for expenses, what is the maximum amount taxpayers are allowed as a deduction without being required to substantiate the amount of the expenses?

A) The appropriate Federal per diem amount.
B) $75 per day.
C) All expenses up to $25 per day.
D) The per diem rate established by the state in which they live.
E) None of the above.

F) B) and C)
G) A) and B)

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Question 23

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

In which of the following plans is this statement true: A deduction is allowed for contributions to the plan, and no income tax consequences result from distributions to the participant at retirement.

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).

Madison and Christopher are staff accountants at a major public accounting firm. Both are pursuing a law degree in a night program at local law school. Madison contends that the cost of the program is a deduction for income tax purposes, while Christopher maintains that it is not. Who is correct and why?

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

Which, if any, of the following is an advantage of using the simplified method for determining the office in the home deduction?

After the automatic mileage rate has been set by the IRS for a year, it cannot later be changed by the IRS.

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

When is a taxpayer's work assignment in a new locale temporary? Permanent? What difference does it make?

An individual is considered an active participant in an employer-sponsored retirement plan merely because an individual's spouse is an active participant for any part of a plan year in applying the IRA phase-out provision.

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

Jana has $225,000 of earned income in 2018. Calculate the amount she can contribute to a SEP.

Regarding the simplified method of computing the office in the home deduction, comment on the following independent factors. a. Taxpayer has set aside 400 square feet for use as an office. b. Taxpayer has repainted and recarpeted the office area. c. In past years, taxpayer has always taken the deduction using the regular (actual expense) method. d. The net income from the business is not large.

Which of the following expenses, if any, qualify as deductible in 2018?

A worker may prefer to be classified as an employee (rather than an independent contractor) for which of the following reasons:

Sammy, age 31, is unmarried and is not an active participant in a qualified retirement plan. His modified AGI is $55,000 in 2018. The maximum amount that Sammy can deduct for a contribution to a traditional IRA is:

For the spousal IRA provision to apply, a joint return must be filed.

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