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

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Question 1

Multiple Choice

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

A) Regardless of the amount of a taxpayer's MAGI.
B) To cover room and board expenses to attend college.
C) To a married taxpayer filing a separate return.
D) Even if a taxpayer does claim the standard deduction.
E) None of these.

F) B) and E)
G) B) and C)

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Question 2

Multiple Choice

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

A) To claim unreimbursed work-related expenses as a deduction for AGI.
B) To avoid the self-employment tax.
C) To avoid the overall limitation (50%) on unreimbursed business entertainment expenses.
D) To avoid the limitations on unreimbursed work-related expenses.
E) None of these.

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

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Question 3

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Isabella is a dental hygienist who works for five different dentists. She spends one day a week (i.e., Monday through Friday) with each. All of the dentists except Dr. Stanki (the Wednesday assignment) treat her as an employee. Dr. Stanki, however, classifies her as being self-employed. Comment on this discrepancy in treatment.

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

Discuss the 50% overall limitation in connection with various employee expenses under the following arrangements: a. The employee is not reimbursed by the employer. b. The employee is fully reimbursed under a nonaccountable plan. c. The employee is partially reimbursed under an accountable plan. d. The employee is fully reimbursed under an accountable plan.

A self-employed taxpayer who lives and works in Kansas City travels to Chicago on an eight-day business trip. While in Chicago, the taxpayer uses the hotel valet service to have some laundry done. The valet charge is a nondeductible personal travel expense.

Statutory employees:

Brian makes gifts as follows: $\begin{array}{lr}\text { Recipient }&\text { CostofGitt Mr. }\\\text { Brown (a client) } & \$ 27 \\\text { Mrs. Brown (Mr. Brown's wife) } & 15 \\\text { Ms. Smith (Brian's receptionist) } & 30 \\\text { Mr. Jones (Brian's boss) } & 40\\\text { * Includes \$2 for gift wrapping }\end{array}$ Presuming adequate substantiation and no reimbursement, how much may Brian deduct?

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

A statutory employee is not a common law employee but is subject to Social Security tax.

For self-employed taxpayers, travel expenses are deductions for AGI.

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

Qualified business income includes the reasonable compensation paid to the taxpayer by a qualified trade or business and guaranteed payments made to a partner for services rendered.

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

Corey is the city sales manager for RIBS, a national fast food franchise. Every working day, Corey drives his car as follows: $\begin{array}{ll}&\text { Miles }\\\text { Home to office } & 20 \\\text { Office to RIBS No. } 1 & 15 \\\text { RIBS No. } 1 \text { to No. } 2 & 18 \\\text { RIBS No. } 2 \text { to No. } 3 & 13 \\\text { RIBS No. } 3 \text { to home } & 30\end{array}$ Corey renders an adequate accounting to his employer. As a result, Corey's reimburseable mileage is:

Jordan performs services for Ryan. Which of the following factors, if any, indicates that Jordan is an independent contractor rather than an employee?

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

How are combined business/pleasure trips treated for travel within the United States as opposed to foreign travel?

For tax purposes, travel is a broader classification than transportation.

Aiden performs services for Lucas. Which of the following factors indicates that Aiden is an employee rather than an independent contractor?