Question 1

Terry is a policeman employed by the city. He must purchase and maintain his uniforms. The total cost of purchasing and maintaining uniforms is $1,000 for the current year. How much may he deduct, why, and where on his tax return?

Accepted Answer

The answer of Terry is a policeman employed by the...

Question 2

To be deductible as the cost of special work clothing or uniforms:

Accepted Answer

In order for special work clothing or uniforms to be deductible, they must not be suitable for everyday use and must be required as a condition of the job. This means that the clothing is unique to the job and is necessary for the job to be performed. Upkeep may also be deductible as a business expense.

Question 3

Sally is a high school math teacher. In 2019, she purchases $400 worth of supplies related to her teaching. Her spouse, Gabe, is a high school math teacher and spends $100 in education supplies for his classes. If married filing jointly, what is the 2019 for AGI educator's expenses deduction?

Accepted Answer

The AGI educator's expenses deduction allows educators to deduct up to $250 each for qualified expenses. However, if married filing jointly and both spouses are eligible educators, they are only allowed to deduct a maximum of $500 total for their combined expenses. In this case, Sally and Gabe's combined expenses are $500, so their deduction would be $350 (the maximum allowed for their situation).

Question 4

Which of the following is deductible as dues, subscriptions, or publications?

Accepted Answer

Subscriptions to professional publications related to one's occupation are deductible as dues, subscriptions, or publications. Therefore, a tax attorney's subscription to the "Journal of Taxation" is deductible. The other choices do not qualify for this deduction.

Question 5

Acme Corporation had the following expenses:

Acme has a qualified plan for the job awards. Calculate Acme’s total deductions for the above expenses.

Accepted Answer

The answer of Acme Corporation had the following expenses:

Acme has...

Question 6

Sue is a small business owner who often gives gifts to clients. She gives a $40 gift to her client, Mr. Smith, and his wife. Sue spent $6 to wrap the gift. She also gave out 400 calendars with her company name on them. Each calendar cost $1. Sue also gave her secretary a $370 watch for his 10 years of service. How much of the above expenses may she deduct?

Accepted Answer

For tax purposes, business gifts are limited to $25 per person per year. However, the $6 wrapping cost is allowed in addition to the $40 gift, so a total of $46 may be deducted for Mr. Smith and his wife. The cost of the calendars ($400 x $1) is $400 and may be fully deducted as a business expense. The watch given to the secretary for his years of service is not considered a gift, but rather a bonus or incentive, and therefore its cost of $370 may be fully deducted as a business expense. 
Total deductible expenses = $46 + $400 + $370 = $816. 
Therefore, the correct answer is D.

Question 7

Which of the following does not give rise to a business expense for self-employed taxpayer's uniforms or special clothing?

Accepted Answer

While uniforms and special clothing are deductible business expenses for self-employed taxpayers, a business suit typically does not qualify as a uniform or special clothing for a lawyer. The key factor in determining whether clothing is deductible is whether it is required as a condition of employment and not something that can also be worn outside of work.

Question 8

Nancy owns a small dress store. During the year, Nancy gives business gifts having the indicated cost to the following individuals: $$\begin{array} { l l } 
\text { Mrs. Johns (a customer) } & \$ 37 \text { plus } \$ 3 \text { shipping } \
\text { Mr. Johns (nonclient husband of Mrs. Johns) } & \$ 10 \
\text { Ms. B rown (a customer) } & \$ 22
\end{array}$$ What is the amount of Nancy's deduction for business gifts?

Accepted Answer

The IRS allows a deduction of up to $25 per recipient for business gifts. Nancy can deduct $25 for Mrs. Johns and $22 for Ms. Brown, totaling $47. The $10 gift to Mr. Johns is not deductible as it exceeds the $25 limit when combined with Mrs. Johns' gift. Shipping costs are included in the gift cost, so the total deductible amount is $50.

Question 9

During the current year holiday season, Bob, a barber, gave business gifts to 34 customers. The values of the gifts, which were not of a promotional nature, were as follows: 
10 at $10 each
8 at $25 each
8 at $50 each
8 at $100 each
For the current year, what is the amount of Bob's business gift deduction?

Accepted Answer

The IRS allows a deduction of up to $25 per gift to an individual per year. Therefore, for the 10 gifts at $10 each, the full $100 is deductible. For the remaining 24 gifts (8 at $25 each, 8 at $50 each, and 8 at $100 each), only $25 per gift is deductible, totaling $600 ($25 x 24). Adding these amounts gives a total deduction of $700 ($100 + $600).

Question 10

Carol, a CPA, is always required by her employer to wear to work either a gray or a blue business suit with matching shoes. Carol would never consider wearing her gray or blue suits and matching shoes anywhere other than work since she considers them uncomfortable as well as unattractive. Can Carol deduct the cost of the suits and shoes as special work clothing or uniforms? Explain

Accepted Answer

The answer of Carol, a CPA, is always required by...

Question 11

A gift to a foreman by a worker is considered business related and therefore subject to the $25 limit.

Accepted Answer

The answer of A gift to a foreman by a...

Question 12

A business gift with a value of $35 presented to a client and his nonclient spouse is fully deductible by the donor.

Accepted Answer

The IRS generally allows a deduction of up to $25 for business gifts per recipient, per year. Gifts over this amount are not fully deductible. Since the gift is to a client and their spouse, the total deductible amount would be $50 ($25 per recipient), not $35 for both.

Question 13

Marco makes the following business gifts during the year: $\begin{array}{ll}
\text { Miss Scarlett (a potential client) } & \$ 30 \
\text { Mr. and Mrs. White (both are dients) } & \$ 40 \
\text { Professor Plum (a dient) } & \$ 18 \
\text { Mrs. Pum (the nonclient wife of Frofessor Plum) } & \$ 12 \
\text { Charles Mustard (Marco's boss) } & \$ 27
\end{array}$ Marco also spent $15 on wrapping paper and a card for the above gift to the Whites.
Calculate Marco's total allowed deduction for gifts

Accepted Answer

The answer of Marco makes the following business gifts during...

Question 14

Teachers at the kindergarten through high school level may deduct a maximum of $225 of education supplies and materials cost each year ($450 if married filing jointly and both spouses are educators).

Accepted Answer

As of my last update in 2023, teachers at the kindergarten through high school level can deduct up to $300 of out-of-pocket expenses for classroom supplies on their taxes for the year 2022. If both spouses are educators and file jointly, they can deduct up to $600. The amount was previously $250 before being adjusted for inflation.

Question 15

The cost of a subscription for a hospital intern to the New England Journal of Medicine is a deductible expense for the hospital.

Accepted Answer

The cost of a subscription for a hospital intern to the New England Journal of Medicine is considered a professional development expense and can be deducted as a business expense by the hospital.

Question 16

Paul is a general contractor. How much of the following expenses may Paul deduct? $\begin{array}{lr}
\text { Dues paid to the Associated Builders Society } & \$ 250 \
\text { Dues paid to the Masonry Society } & 325 \
\text { Dues paid to the Wine of the Month Club } & 200 \
\text { Subscription to "Dwell", a home design magazine } & 25 \
\text { Subscription to "Sports Illustrated" magazine } & 40
\end{array}$

Accepted Answer

The answer of Paul is a general contractor. How much...

Question 17

There is a limitation of $25 per donee on the deduction of gifts to employees for length of service.

Accepted Answer

The IRS allows employers to deduct gifts to employees as a business expense, but there is no specific $25 limit per donee for length of service awards. Instead, certain conditions must be met for the gift to be deductible and not taxable to the employee, such as the award being part of a meaningful presentation and not seeming to be disguised compensation. The actual limitation concerns the type of award (e.g., tangible personal property) and its value under specific tax-free award programs.

Question 18

Michael has a very successful business as a financial consultant. Michael attends the following seminars: $\begin{array}{lr}
\text { "Zen Your Way to Riches" } & \$ 800 \
\text { "Backyard Gardening" } & 50 \
\text { "Computer Marketing Tools" } & 200 \
\text { "Passing the Legal Bar Exam" } & 500 \
\text { "Beating the Market" } & 300
\end{array}$ How much can Michael deduct as business education expenses?

Accepted Answer

The answer of Michael has a very successful business as...

Question 19

Natasha is a self-employed private language tutor. In 2019, she obtained her teaching credentials, hoping to receive a job as a seventh grade public school English teacher. She had the following education expenses for the year: $\begin{array} { l  }
 \text { Tuition to finish her credentials program}&\$5,000 \
 \text {Review course for the Teacher Certification Exam}&1,000 \
\end{array}$
 Natasha also attended a seminar in Washington, D.C., titled "The Motivated Student." Her expenses for the trip are as follows: $$\begin{array} { l r } 
\text { Fee for the course } & \$ 700 \
\text { Airplane ticket } & 500 \
\text { Hotel } & 1,000 \
\text { Meals } & \underline{400}\
\text { Total } & \$ 2,600
\end{array}$$ Determine how much of the above expenses are deductible on her Schedule C.

Accepted Answer

The answer of Natasha is a self-employed private language tutor....

Question 20

The cost of a blue wool suit for an accountant is a deductible expense.

Accepted Answer

The answer of The cost of a blue wool suit...

Quiz 3: Business Income and Expenses