Question 1

By itself, credit card receipts will not constitute adequate substantiation for travel expenses.

Accepted Answer

According to IRS guidelines, credit card receipts alone are not sufficient substantiation for travel expenses. The traveler must also provide other documentation such as a detailed itinerary, a receipt or invoice receipt, and records of any expenses paid by cash or check.

Question 2

Qualified business income (QBI) is defined as the ordinary income less ordinary deductions a taxpayer earns from a qualified trade or business (e.g., from a sole proprietorship, S corporation, or partnership) conducted in the United States by the taxpayer.

Accepted Answer

Qualified business income (QBI) is defined as ordinary income less ordinary deductions earned from a qualified trade or business conducted in the United States by the taxpayer, including sole proprietorships, S corporations, and partnerships.

Question 3

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.

Accepted Answer

The $250 deduction for educators only applies to K-12 teachers, instructors, counselors, principals, or aides for at least 900 hours a school year in a school that provides elementary or secondary education, not to college instructors.

Question 4

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

Accepted Answer

Both traditional and Roth IRAs allow for tax-free accumulation of income within the plan. However, the main difference between the two is the timing of the tax benefit. Traditional IRAs provide a tax deduction on contributions made in the current tax year, while Roth IRA contributions are made with after-tax income but qualified withdrawals in retirement are tax-free.

Question 5

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

Accepted Answer

The Federal per diem rates vary by location, so they are not the same for all locations in the country.

Question 6

One of the purposes of the qualified business income deduction was to reduce the taxes on businesses that are operating in noncorporate business forms (e.g., sole proprietors, partnerships, and S corporations).

Accepted Answer

The qualified business income deduction was specifically designed to benefit businesses operating in noncorporate forms, such as sole proprietors, partnerships, and S corporations. Its purpose was to help reduce their taxes and make them more competitive with larger corporations that pay lower tax rates.

Question 7

In the case of an office in the home deduction, the exclusive business use test does not apply when the home is used as a daycare center.

Accepted Answer

The exclusive business use test does not apply when the home is used as a daycare center for the office in the home deduction. This means that if a portion of your home is used regularly and exclusively for the care of children, elderly persons, or persons with disabilities, you may still qualify for the deduction even if the space is also used for personal purposes.

Question 8

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

Accepted Answer

The answer of A taxpayer who claims the standard deduction...

Question 9

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

Accepted Answer

The home office deduction is not limited to homeowners; renters can also qualify as long as they use part of their rental for business purposes and meet other IRS requirements.

Question 10

Code § 199A permits an individual to deduct 25% of the qualified business income generated through a sole proprietorship, a partnership, or an S corporation.

Accepted Answer

Code § 199A allows an individual to deduct up to 20% of their qualified business income from a sole proprietorship, partnership, or S corporation, not 25%.

Question 11

Employees who render an adequate accounting to employers and are fully reimbursed will shift the 50% overall limitation on meal expenses to their employer.

Accepted Answer

When employees provide an adequate accounting to their employers and are fully reimbursed for their business-related meal expenses, the 50% overall limitation on meal expenses will be shifted to their employer. This means that the employer can deduct the full cost of the meals as a business expense, up to the allowable limits.

Question 12

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.

Accepted Answer

The gifts of a turkey and a bottle of wine given by Teal Corporation to each employee during the December holiday season are considered de minimis fringe benefits, which are excluded from the employee's income and are not subject to the 50% limitation that applies to meals and entertainment expenses.

Question 13

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

Accepted Answer

Self-employed taxpayers can deduct their travel expenses as business expenses on their Schedule C to reduce their AGI (Adjusted Gross Income).

Question 14

Under the simplified method, the maximum office in the home deduction allowed is the greater of $1,500 or the office square feet × $5.

Accepted Answer

Under the simplified method, the maximum office in the home deduction allowed is $1,500, calculated as the office square feet (up to 300 square feet) × $5.

Question 15

Under the regular (actual expense) method, the portion of the office in the home deduction that exceeds the income from the business can be carried over to future years.

Accepted Answer

Under the regular method, if the deduction for the portion of the office in the home exceeds the income from the business in the current year, the excess can be carried over to future years as a deduction.

Question 16

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

Accepted Answer

Contributions to a traditional IRA are tax-deductible, but distributions during retirement are subject to income tax.

Question 17

A qualified trade or business includes any trade or business including providing services as an employee.

Accepted Answer

A qualified trade or business under the IRS guidelines specifically excludes the trade or business of performing services as an employee.

Question 18

There are three limitations on the qualified business income deduction: an overall limitation (based on modified taxable income), another that applies to high income taxpayers, and a third that applies to certain types of services businesses.

Accepted Answer

This statement is true. The qualified business income deduction has three limitations - an overall limitation based on modified taxable income, a high income limitation, and a limitation for certain services businesses.

Question 19

A taxpayer who claims the standard deduction may be able to claim an office in the home deduction.

Accepted Answer

Even if a taxpayer claims the standard deduction, they may still be able to claim the office in the home deduction if they meet the requirements.

Question 20

For tax year 2019, Taylor used the simplified method of determining her office in the home deduction.For 2020, Taylor must continue to use the simplified method and cannot switch to the regular (actual expense) method.

Accepted Answer

Taxpayers have the option each year to choose between the simplified method and the actual expense method for home office deductions and can switch between methods from one year to the next.

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