Question 1

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 2

Mallard Corporation furnishes meals at cost to its employees by means of a cafeteria it maintains.The cost of operating the cafeteria is subject to the cutback adjustment.

Accepted Answer

The answer of Mallard Corporation furnishes meals at cost to...

Question 3

Tired of renting, Dr.Smith buys the academic robes she will wear at her college's graduation procession.The cost of this attire qualifies as a uniform expense.

Accepted Answer

The cost of academic robes for a graduation procession can be considered a uniform expense for certain professions, such as college faculty members. Therefore, Dr. Smith can claim this as a uniform expense.

Question 4

Every year, Penguin Corporation gives each employee a fruit basket and a bottle of wine at Christmas.These gifts are not subject to the cutback adjustment.

Accepted Answer

The statement clearly mentions that these gifts are not subject to the cutback adjustment.

Question 5

After graduating from college with a degree in chemistry, Alberto obtains a job as a chemist with DuPont.Alberto's job search expenses qualify as deductions.

Accepted Answer

The answer of After graduating from college with a degree...

Question 6

Dana contributes $2,000 too much to a § 401(k) plan which is not returned within 2 1/2 month after the close of the tax year. The employer will have to pay a tax of $200

Accepted Answer

If an employee contributes more than the allowed limit to a § 401(k) plan and this excess amount is not corrected within 2 1/2 months after the end of the tax year, the employer will have to pay a 10% excise tax on the excess contribution. In this case, $200 would be the amount of the excise tax on the $2,000 excess contribution.

Question 7

A participant has an adjusted basis of $0 in any nondeductible contributions to a traditional IRA.

Accepted Answer

The answer of A participant has an adjusted basis of...

Question 8

A taxpayer takes six clients to an NBA playoff game.If all of the tickets (list price of $120 each) are purchased on the Internet for $1,800 ($300 each), only $150 ($300 ´ 50% cutback adjustment) per ticket is deductible.

Accepted Answer

The deductible amount for entertainment expenses, such as tickets to an NBA playoff game, is subject to a 50% cutback adjustment, but the deduction is based on the face value of the ticket, not the inflated price paid. Therefore, only $60 per ticket (50% of $120) is deductible, not $150.

Question 9

If the cost of uniforms is deductible, their maintenance cost (e.g., laundry, dry cleaning, alterations) also is deductible.

Accepted Answer

If the cost of uniforms is deductible, their maintenance cost, such as laundry or alteration, is also deductible as part of the overall cost of the uniform.

Question 10

As Christmas presents, Lily sends gift certificates (each valued at $25) to Caden (a key client) and to each of his two minor children.Lily can deduct $75 (3 ´ $25) as to these gifts.

Accepted Answer

The IRS limits the deduction for business gifts to $25 per recipient per year, so Lily can only deduct $25 for Caden and $25 for each of his children, totaling $75, but only $25 per recipient is deductible.

Question 11

Qualifying job search expenses are deductible even if the taxpayer does not change jobs.

Accepted Answer

Qualifying job search expenses, such as résumé preparation, career counseling, and travel expenses for job interviews, are deductible as long as the taxpayer is looking for a job in the same field as their current or previous job. It does not require a change in jobs to be deductible.

Question 12

Any pre-tax amount elected by an employee as a contribution to a § 401(k) plan that does not exceed the statutory limit is not includible in gross income in the year of deferral and is 100% vested.

Accepted Answer

This statement is true. According to section 401(k) of the Internal Revenue Code, pre-tax contributions to a 401(k) plan are not included in gross income and are fully vested. However, there is a maximum contribution limit each year, which can change annually based on cost-of-living adjustments.

Question 13

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 14

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

According to IRS Publication 587, if your home is used as a daycare facility, you do not have to meet the exclusive use test. However, you must meet all other requirements for the home office deduction.

Question 15

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

According to IRS rules, any portion of the home office deduction that exceeds the income from the business can be carried over to future tax years. This allows taxpayers with home offices to still receive the full benefit of the deduction even if their business income is not high enough to use it all in one year.

Question 16

Jackson gives his supervisor a $30 box of chocolates on her birthday.Jackson may claim only $25 as a deduction.

Accepted Answer

The answer of Jackson gives his supervisor a $30 box...

Question 17

Ethan, a bachelor with no immediate family, uses the Pine Shadows Country Club exclusively for his business entertaining.None of Ethan's annual dues for his club membership are deductible.

Accepted Answer

The IRS generally does not allow deductions for club dues, even if the club is used for business purposes, as per the tax code regulations.

Question 18

Tickets to a theater performance or sporting event can be treated as either business entertainment or a business gift if the taxpayer does not accompany the client to the event.

Accepted Answer

If the taxpayer does not accompany the client to the event, tickets to a theater performance or sporting event can be treated as either business entertainment or a business gift. However, the treatment will depend on other factors like the purpose of the gift, the relationship between the taxpayer and the recipient, and the cost of the tickets.

Question 19

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 20

Frank, a recently retired FBI agent, pays job search expenses to obtain a position with a city police department.Frank's job search expenses do not qualify as deductions.

Accepted Answer

The answer of Frank, a recently retired FBI agent, pays...

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