Question 1

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

Accepted Answer

The standard mileage rate, often referred to as the automatic mileage method for calculating vehicle expenses for business use, includes an allowance for depreciation. This rate is designed to cover all the costs associated with operating a vehicle, including depreciation, fuel, maintenance, and insurance.

Question 2

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.

Accepted Answer

Eileen's airfare for her business meeting in Rome is deductible as a business expense. The two days she spends touring Italy are not deductible as they are considered personal travel.

Question 3

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

Accepted Answer

The answer of A deduction for parking and other traffic...

Question 4

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

Accepted Answer

Travel expenses for tax purposes include not only transportation costs, but also lodging, meals, and other incidental expenses during a business trip. Transportation expenses are just one component of travel expenses.

Question 5

A taxpayer who uses the automatic mileage method for the business use of an automobile can change to the actual cost method in a later year.

Accepted Answer

According to the IRS, a taxpayer who uses the automatic mileage method for the business use of an automobile can change to the actual cost method in a later year. However, the reverse is not allowed - once a taxpayer chooses the actual cost method, they cannot switch to the mileage method in a later year.

Question 6

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.

Accepted Answer

The entire cost of the airfare is deductible because the primary reason for the trip is business. The days spent visiting relatives do not affect the deductibility of the transportation costs.

Question 7

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.

Accepted Answer

Since Bob's travel was for business purposes, his air fare is considered a deductible expense.

Question 8

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

Accepted Answer

The valet charge is a deductible business expense because it is incurred while the taxpayer is on a business trip.

Question 9

Carol is self-employed and uses her automobile solely in her business.If she uses the actual expense method to compute expenses, she can include any interest paid on the loan taken out to purchase the car.

Accepted Answer

According to the IRS, if a self-employed individual uses their personal vehicle for business purposes, they can deduct business-related expenses including interest paid on a car loan if they use the actual expense method to calculate expenses.

Question 10

Once the actual cost method is used, a taxpayer cannot change to the automatic mileage method in a later year.

Accepted Answer

A taxpayer can switch from actual cost method to automatic mileage method in a later year, but they cannot switch from automatic mileage method to actual cost method.

Question 11

The tax law specifically provides that a taxpayer cannot be temporarily away from home for any period of employment that exceeds one year.

Accepted Answer

According to the IRS, to deduct travel expenses, a taxpayer must be traveling away from home for business purposes. However, if the period of employment in a single location exceeds one year, it is considered indefinite, and the location becomes the taxpayer's new tax home, making any travel expenses nondeductible.

Question 12

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

Accepted Answer

The taxpayer can deduct the actual expenses of tolls and parking or use the standard mileage rate which includes an allowance for these expenses. Either way, the business portion of tolls and parking can be deducted as a business expense.

Question 13

James has a job that compels him to go to many different states during the year.It is possible that James was never away from his tax home during the year.

Accepted Answer

The answer of James has a job that compels him...

Question 14

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

Accepted Answer

The automatic mileage rate set by the IRS can be changed during the year if necessary to reflect changes in the cost of operating a vehicle.

Question 15

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).

Accepted Answer

The answer of Marvin lives with his family in Alabama.He...

Question 16

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

Accepted Answer

When deciding between the actual expense method and the standard mileage rate for deducting automobile expenses, the cost of insurance is one of the actual expenses to be considered, as it can significantly impact the total expense calculation.

Question 17

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

Accepted Answer

Using the standard mileage rate to calculate auto expenses for business purposes includes all costs associated with operating the vehicle, such as maintenance and insurance, thus excluding the deduction of additional expenses like automobile club dues.

Question 18

Beginning in 2018, the moving expense deduction has been eliminated for all taxpayers.

Accepted Answer

The answer of Beginning in 2018, the moving expense deduction...

Question 19

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.

Accepted Answer

This is true because the taxpayer may be eligible for certain education tax credits, such as the American Opportunity Credit or the Lifetime Learning Credit, even if they do not itemize their deductions. These credits are based on the amount of qualified education expenses paid during the tax year and can reduce the amount of tax owed or even result in a refund.

Question 20

Amy lives and works in St.Louis.In the morning she flies to Boston, has a three-hour business meeting, and returns to St.Louis that evening.For tax purposes, Amy was away from home.

Accepted Answer

For tax purposes, being "away from home" typically requires an overnight stay, which did not occur in Amy's scenario as she returned to St. Louis the same evening.

Quiz 11: Individuals As Employees and Proprietors