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Exam 11: Individuals As Employees and Proprietors

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Question 41

Multiple Choice

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Match the statements that relate to each other.(Note: Choice L may be used more than once.) -Deduction by an employee of unreimbursed office-in-the-home expenses

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

M) A) and H)
N) C) and E)

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Question 42

True/False

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Liam just graduated from college.Because it is his first job, the cost of moving his personal belongings from his parents' home to the job site does not qualify for the moving expense deduction.

A) True
B) False

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Question 43

Multiple Choice

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Tracy, the regional sales director for a manufacturer of exercise equipment, pays $2,500 to rent a skybox for a visiting performance of the Harlem Globetrotters.The skybox holds 10 seats, and Tracy invites 7 clients to the event.Nonluxury seats range in price from $80 to $120.The refreshments provided during the event cost $600.If Tracy meets all of the requirements for deductibility (i.e., business discussion, substantiation) , she may deduct:

Sonja is a United States citizen who has worked in Spain for the past 10 months.She received $8,000 a month as compensation.Her employer has offered to extend Sonja's contract to work in Spain for another 6 months at the same rate of pay.If she rejects the offer, she can return to the United States and receive a salary of $10,000 per month.While working in Spain, she is subject to the Spain income tax, which is approximately 11% of her gross pay.The marginal tax rate on her income taxed in the United States is 25%.Compare Sonja's after-tax income assuming she remains in Spain with her after-tax income if she returns to the United States.

Amy works as an auditor for a large major CPA firm.During the months of September through November of each year, she is permanently assigned to the team auditing Garnet Corporation.As a result, every day she drives from her home to Garnet and returns home after work.Mileage is as follows: $\begin{array} { l c } & \text { Miles } \\\text { Home to office } & 10 \\\text { Home to Garnet } & 30 \\\text { Office to Garnet } & 35\end{array}$ ? For these three months, Amy's deductible mileage for each workday is:

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

During the year, Sophie 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 unreimbursed expenses are: $\begin{array} { l r } \text { Air fare } & \$ 3,000 \\\text { Lodging } & 800 \\\text { Meals } & 600 \\\text { Entertainment } & 400\end{array}$ ? Sophie's deductible expenses are:

On February 1, 2017, Tuan withdrew $15,000 from his IRA #1.He deposited the funds back into IRA #1 within 60 days (a"rollover").Tuan may do one more nontaxable rollover distribution from either IRA #1 or IRA #2 starting in April 2017.

If an individual is ineligible to make a deductible contribution to a traditional IRA, nondeductible contributions of any amount can be made to a traditional IRA.

Bob lives and works in Newark, NJ.He travels to London for a three-day business meeting, after which he spends three days touring Scotland.All of his air fare is deductible.

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

If an employer pays for the employee's long-term care insurance premiums, the employee can exclude from gross income the premiums but all of the benefits collected must be included in gross income.

During the year, Walt travels from Seattle to Tokyo (Japan) on business.His time was spent as follows: 2 days travel (one day each way) , 2 days business, and 2 days personal.His expenses for the trip were as follows (meals and lodging reflect only the business portion) : $\begin{array} { l r } \text { Air fare } & \$ 3,000 \\\text { Lodging } & 2,000 \\\text { Meals and entertainment } & 1,000\end{array}$ ? Presuming no reimbursement, Walt's deductible expenses are:

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

Meg's employer carries insurance on its employees that will pay an employee his or her regular salary while the employee is away from work due to illness.The premiums for Meg's coverage were $1,800.Meg was absent from work for two months as a result of a kidney infection.Meg's employer's insurance company paid Meg's regular salary of $8,000 while she was away from work.Meg also collected $2,000 on a wage continuation policy she had purchased.Meg must include $11,800 in her gross income.

Under the Swan Company's cafeteria plan, all full-time employees are allowed to select any combination of the benefits below, but the total received by the employee cannot exceed $8,000 a year. I. Group medical and hospitalization insurance for the employee, $3,600 a year. II. Group medical and hospitalization insurance for the employee's spouse and children, $1,200 a year. III. Child-care payments, actual cost but not more than $4,800 a year. IV. Cash required to bring the total of benefits and cash to $8,000. ? Which of the following statements is true?

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.

The ceiling amounts and percentages for 2017 for the two portions of the self-employment tax are: ​ $\begin{array}{ll}\text { Social Security portion }&\text { Medicare portion }\\\text { a. } \$ 127,200 ; 12.4 \% & \text { Unlimited; } 2.9 \% \\\text { b. } \$ 127,200 ; 15.3 \% & \text { Unlimited; } 2.9 \% \\\text { c. } \$ 118,500 ; 12.4 \% & \text { Unlimited; } 2.9 \% \\\text { d. } \$ 118,500 ; 2.9 \% & \text { Unlimited; } 13.3 \%\end{array}$

Match the statements that relate to each other.(Note: Choice L may be used more than once.) -Tax home has changed

Alfredo, a self-employed patent attorney, flew from his home in Chicago to Miami, had lunch alone at the airport, conducted business in the afternoon, and returned to Chicago in the evening.His expenses were as follows: $\begin{array} { l r } \text { Airfare } & \$ 900 \\\text { Airport parking (Chicago) } & 60 \\\text { Lunch } & 30 \\\text { Taxis (Miami) } & 42\end{array}$ ​ What is Alfredo's deductible expense for the trip?