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

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Question 51

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Cathy takes five key clients to dinner and incurs the following costs: $320 limousine rental, $920 drinks and dinner, and $200 tips? assume that there were substantive business discussions during dinner. Several days after the function, Cathy mails each client a pen costing $25. In addition, Cathy pays $4 for gift wrapping and mailing each pen. Assuming adequate substantiation and a business justification, what is Cathy's deduction?

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$1,025. $320 + [($920 + $200) × 50%] = $...

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Question 52

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Janet works at Green Company's call center. If Janet's compensation is based on the number of calls she handles, she is an independent contractor.

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B) False

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Question 53

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Under the automatic mileage method, depreciation is not taken into account in the mileage rate allowed.

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: Sophie's deductible expenses are:

An individual, age 40, who is not subject to the phase-out provision may contribute a nondeductible amount to a Roth IRA up to $5,500 per year in 2018.

Every year, Teal Corporation gives each employee a turkey and a bottle of wine at the December holiday season. These gifts are subject to the 50% limitation.

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

Travel status requires that the taxpayer be away from home overnight. a. What does "away from home overnight" mean? b. What tax advantages result from being in travel status?

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

Madison is an instructor of fine arts at a local community college. If she spends $600 (not reimbursed) on art supplies for her classes, $250 of this amount can be claimed as a deduction for AGI.

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

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.

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

A participant, who is age 38, in a cash or deferred arrangement plan [§ 401(k) ] may contribute up to what amount in 2018?

Mary establishes a Roth IRA at age 50 and contributes the maximum amount per year to the Roth IRA for 15 years. The account is now worth $199,000, consisting of $75,000 in contributions plus $124,000 in accumulated earnings. How much can Mary withdraw tax-free?

Rod uses his automobile for both business and personal use and claims the automatic mileage rate for all purposes. During 2018, his mileage was as follows: How much can Rod claim for mileage?

Tax advantages of being self-employed (rather than being an employee) include:

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.

For tax year 2018, Taylor used the simplified method of determining her office in the home deduction. For 2019, Taylor must continue to use the simplified method and cannot switch to the regular (actual expense) method.

Which, if any, of the following expenses are deductible?