Question 1

Which of the following is true about future qualified distributions from a Roth IRA by a person who will be 65 years old at the time the distributions begin? Assume the individual opened the account before age 60.

Accepted Answer

If the individual opened the Roth IRA before age 60 and meets the five-year holding requirement, all distributions made after age 59½ are considered qualified and will be entirely tax-free, including both contributions and earnings.

Question 2

Ruby Corporation grants stock options to Iris on February 1,2012.The options do not have a readily ascertainable value.The option price is $100,and the FMV of the Ruby stock is also $100 on the grant date.The option allows Iris to purchase 200 shares of Ruby stock.Iris exercises the option on August 1,2013,when the stock's FMV is $150.Iris sells the stock on December 5,2014 for $400.Determine the amount and character (i.e.ordinary,LTCG or STCG)of income recognized by Iris and the deduction allowed Ruby Corporation in 2012,2013 and 2014 under the following assumptions:
a.The stock option is an incentive stock option.
b.The stock option is a nonqualified stock option.

Accepted Answer

The answer of Ruby Corporation grants stock options to Iris...

Question 3

Ellie,a CPA,incurred the following deductible education expenses to maintain or improve her skills:
  Ellie's AGI for the year is $60,000.
a.If Ellie is self-employed,what are the amount of and the nature of the deduction for these expenses?
b.If,instead,Ellie is an employee who is not reimbursed by his employer,what are the amount of and the nature of the deduction for these expenses (after limitations)?

Accepted Answer

The answer of Ellie,a CPA,incurred the following deductible education expenses...

Question 4

Feng,a single 40 year old lawyer,is covered by a qualified retirement at work.His salary is $109,000,and his total AGI is $121,000.The maximum contribution he can make to a Roth IRA is

Accepted Answer

The answer of Feng,a single 40 year old lawyer,is covered...

Question 5

What two conditions are necessary for moving expenses to be deductible?

Accepted Answer

The answer of What two conditions are necessary for moving...

Question 6

What factors are considered in determining whether an expense is a deductible travel expense?

Accepted Answer

The answer of What factors are considered in determining whether...

Question 7

All of the following are true with regard to a Roth IRA except

Accepted Answer

Contributions to Roth IRAs do not need to cease after the owner has reached age 70 1/2. In fact, there are no age limits on making contributions to a Roth IRA as long as the individual has earned income.

Question 8

During 2013,Marcia,who is single and is covered under a pension plan at work,contributes $5,500 into a Roth IRA.If her AGI is $63,000,which of the following is true?

Accepted Answer

Since Marcia is covered under a pension plan at work and her AGI is $63,000, she is not eligible to deduct any contributions made to a traditional IRA. However, she can contribute to a Roth IRA since the contributions are made with after-tax dollars and are not deductible.

Question 9

Richard traveled from New Orleans to New York for both business and vacation.He spent 4 days conducting business and some days vacationing.He incurred the following expenses:
  What is his miscellaneous itemized deduction (before the floor),assuming Richard is an employee and is not reimbursed,under the following two circumstances?
a.He spends three days on vacation,in addition to the business days.
b.He spends six days on vacation,in addition to the business days.

Accepted Answer

The answer of Richard traveled from New Orleans to New...

Question 10

Jack takes a $7,000 distribution from his Health Savings Account.$2,000 is used to pay for X-rays and dental surgery.The other $5,000 to make a down payment on a new car.What are the tax consequences to Jack?

Accepted Answer

The answer of Jack takes a $7,000 distribution from his...

Question 11

Dighi,an artist,uses a room in his home (250 square feet)as a studio exclusively to paint.The studio meets the requirements for a home office deduction.(Painting is considered his trade or business.)The following information appears in Dighi's records:
  Expenses related to home office:
  (a)What is the amount of Dighi's home office deduction if he is self-employed?
(b)If some amount is not allowed under the tax law,how is the disallowed amount treated?
(c)Assume all of Dighi's records of expenses relating to the room were destroyed in a major paint spill.How much of a home office deduction,if any,will he be allowed?

Accepted Answer

The answer of Dighi,an artist,uses a room in his home...

Question 12

Tucker (age 52)and Elizabeth (age 48)are a married couple.Tucker is covered under a qualified retirement plan at his job and earned $90,000 in 2013.Elizabeth is employed as a lab technician and earned $30,000 but is not covered under a qualified retirement plan.They file a joint return; have interest and dividend income of $25,000.What is the maximum amount of tax deductible contributions may be made to a traditional IRA?

Accepted Answer

Since Tucker is covered under a qualified retirement plan, the couple's income exceeds the threshold for deducting traditional IRA contributions. Therefore, they cannot claim any tax deductible contributions to a traditional IRA. The contribution limits are not relevant in this case.

Question 13

Which of the following statements regarding Health Savings Accounts is incorrect?

Accepted Answer

Not all taxpayers are eligible to establish a health savings account. To be eligible, an individual must be covered by a high-deductible health plan (HDHP) and have no other health coverage, with certain exceptions.

Question 14

Sarah purchased a new car at the beginning of the year.She makes an adequate accounting to her employer and receives a $2,400 (12,000 miles × 20 cents per mile)reimbursement in 2013 for employment-related business miles.She incurs the following expenses related to both business and personal use:
  She also spent $200 on parking and tolls that were related to business.During the year she drove a total 20,000 miles.
What are the possible amounts of Sarah's deductible transportation expenses?

Accepted Answer

The answer of Sarah purchased a new car at the...

Question 15

Which of the following statements regarding Coverdell Education Savings Accounts is incorrect,disregarding any AGI limits?

Accepted Answer

Distributions from a Coverdell Education Savings Account can be used for both elementary/secondary education and higher education expenses.

Question 16

Explain when educational expenses are deductible for an employee.

Accepted Answer

The answer of Explain when educational expenses are deductible for...

Question 17

Tyler (age 50)and Connie (age 48)are a married couple.Tyler is covered under a qualified retirement plan at his job and earned $175,000 in 2013.Connie is employed as a lab technician and earned $30,000 but is not covered under a qualified retirement plan.They file a joint return; have interest and dividend income of $30,000.What is their maximum for AGI deduction for contributions to a traditional IRA?

Accepted Answer

Since Tyler is covered by a qualified retirement plan and their joint income exceeds the threshold for deductibility, they cannot deduct contributions to a traditional IRA.

Question 18

Rita,a single employee with AGI of $100,000 before consideration of the items below,incurred the following expenses during the year,all of which were unreimbursed unless otherwise indicated:
  In addition,Rita paid $300 for dues to her professional business association.The company reimbursed her after she submitted the appropriate documentation.What is Rita's net miscellaneous itemized deduction for the year after application of all relevant limitations?

Accepted Answer

The answer of Rita,a single employee with AGI of $100,000...

Question 19

David acquired an automobile for $30,000 for use in his unincorporated business in 2011 and used the standard mileage rate method in 2011 and 2012.He switches to the actual expense method for 2013.The automobile was used 25,000 miles in 2011 and 20,000 miles in 2012.What is the amount of the adjusted basis of the automobile for purposes of computing depreciation in 2013?

Accepted Answer

The answer of David acquired an automobile for $30,000 for...

Question 20

Tia is a 52-year-old an unmarried taxpayer who is an active participant in an employer-sponsored qualified retirement plan.Before IRA contributions,her AGI is $63,000 in 2013.
a.What is the maximum amount she can contribute and the maximum deduction she can receive for a contribution to a traditional IRA?
b.What is the maximum amount she can contribute and the maximum deduction she can receive for a contribution to a Roth IRA?

Accepted Answer

The answer of Tia is a 52-year-old an unmarried taxpayer...

Quiz 9: Employee Expenses and Deferred Compensation