Question 1

On their birthdays,Lily sends gift certificates (each valued at $25)to Caden (a key client)and to each of Caden's two minor children.Lily can deduct only $25 as to these gifts.

Accepted Answer

These gifts will be aggregated in applying the $25 limit.

Question 2

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

Mixed use (i.e. ,business and personal)of the home is permitted in daycare situations.

Question 3

Flamingo Corporation furnishes meals at cost to its employees by means of a cafeteria it maintains.The cost of operating the cafeteria is not subject to the cutback adjustment.

Accepted Answer

The fact that the cost of operating the cafeteria is not subject to the cutback adjustment indicates that the company is not making any profit from the cafeteria and is only providing the service at cost to its employees. Therefore, the statement is true.

Question 4

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

The deduction is office square feet × $5 but not to exceed $1,500 or the net income from the business.

Question 5

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 costs such as laundry, dry cleaning, and alterations are also deductible as these expenses are directly related to the maintenance of uniforms.

Question 6

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

Accepted Answer

In the case of a traditional IRA,however,the income will be taxed when distributed to the participant.

Question 7

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

Accepted Answer

The only difference would be a substitution of rent expense for depreciation.Otherwise,the deduction is equally available.

Question 8

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

Accepted Answer

No job change requirement exists.

Question 9

Ethan,a bachelor with no immediate family,uses the Pine Shadows Country Club exclusively for his business entertaining.All of Ethan's annual dues for his club membership are deductible.

Accepted Answer

Dues to country clubs are not deductible.

Question 10

Tired of renting,Dr.Smith buys the academic robes she will wear at her college's graduation procession.The cost of this attire does not qualify as a uniform expense.

Accepted Answer

These robes do qualify as they are not adaptable for ordinary wear.

Question 11

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 qualify as deductions.

Accepted Answer

It appears that Frank is seeking a job in the same trade or business (i.e. ,law enforcement).

Question 12

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 $60 ($120 × 50% cutback adjustment)per ticket is deductible.

Accepted Answer

$60 ($120 × 50% cutback adjustment)per ticket is deductible.

Question 13

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

Job search expenses incurred in obtaining the first job are not deductible.

Question 14

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 special rule for school supplies applies only to elementary and secondary school teachers.

Question 15

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

Accepted Answer

The office in the home deduction will be allowed if the taxpayer is self-employed.

Question 16

For tax year 2013,Taylor used the simplified method of determining her office in the home deduction.For 2014,Taylor must continue to use the simplified method and cannot switch to the regular (actual expense)method.

Accepted Answer

A new choice is available each year.Taylor cannot,however,change the choice she made for 2013.

Question 17

Mallard Corporation pays for a trip to Aruba for its two top salespersons.This expense is subject to the cutback adjustment.

Accepted Answer

The cost of the trips to Aruba are additional compensation to the employees involved.Consequently,they are not subject to the cutback adjustment and are fully deductible by Mallard Corporation.They are also taxed as income to the employees.

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

However,if the taxpayer also attends,the business gift option is not available.

Question 19

Jackson gives his supervisor and her husband each a $30 box of chocolates at Christmas.Jackson may claim only $25 as a deduction.

Accepted Answer

As gifts to supervisors and spouses are not deductible,Jackson has no deduction.

Question 20

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

According to IRS regulations, any home office expense deduction that exceeds the income from the business can be carried forward to future years using the actual expense method. This allows self-employed individuals to use the excess amount as a deduction in future tax years when the business income is higher.

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