Deck 8: Employee Business Expenses

Question 1

H, a famous television talk show host, moved from New York to Los Angeles this year.As part of the move she paid $500 for meals.All of the costs of her moving expenses, including her meals, were reimbursed by her employer.H may deduct $500 as an itemized deduction.

Answer 1

False

Question 2

E moved from Detroit to Beverly Hills to accept a new job as a detective with the Los Angeles Police Department.During the trip to Los Angeles he spent $100 on meals and $400 on lodging.E may deduct $500.

Answer 2

False

Question 3

Taxpayers may deduct the cost of a business meal for a client as long as the surroundings are conducive to a business discussion.A business discussion need not transpire before, after, or during the meal.

Answer 3

False

Question 4

While in Chicago, S took her best customer to a Cubs game.In determining the amount of deductible entertainment expenses, the amount subject to limitation includes the cost of the entertainment, meals, taxes, tips, parking, and transportation to the event.

Question 5

R, a salesman for a drug company, owns a car, which he uses primarily for business.Last year he computed his auto expense deduction using actual expenses.This year, he can simplify his bookkeeping by using the standard mileage rate.

Question 6

D can deduct expenses for a meal when D's client meets with her attorney to discuss a proposed transaction with her company, even though she is not present at the restaurant.

Question 7

Taxpayer B is the president and sole shareholder of XYZ Corporation, which has six employees.The corporation may deduct the cost of a hunting lodge as long as it is primarily used by the employees.

Question 8

T, who graduated from the University of Illinois in June, moved 150 miles to take a job in Chicago that began in September of that year.Because he was not previously employed, he cannot deduct moving expenses this year.

Question 9

L leases a car that he uses primarily for business.L may not elect to use the standard mileage rate to account for his automobile expenses.

Question 10

The costs of which one of the following are valid deductible educational expenses? (Ignore the special deduction for qualified tuition)

A)A college or vocational course necessary to be considered for a job
B)A professional continuing educational program that qualifies the taxpayer for a new job
C)Professional development courses required by an employer for retaining a position
D)A tax seminar attended for reasons unrelated to one's present job

Question 11

K, a professor of accounting at the University of Cincinnati, often teaches continuing education courses for the AICPA.This year she taught a tax update session in Scottsdale.She invited her husband, L, to come along, so the couple flew out to Arizona.L helped her prepare transparencies and flip-charts for her presentation.The cost of L's flight to Scottsdale is not deductible regardless of the nature and relevance of his contribution to K's work because the cost is not related to his own trade or business.

Question 12

A taxpayer who travels within the U.S.generally may deduct all of his transportation expenses for a trip that is primarily for business, and an allocable portion of such transportation expenses when some business is conducted.

Question 13

L is currently an accountant with a large public accounting firm.This year he paid $800 to take a review course to prepare him for the C.P.A.exam.Because L passed the exam, he was promoted to a position open only to certified public accountants.He may deduct the cost of the review course.

Question 14

K is an instructor of European history at High School 101.During the summer she traveled to France, taking slides that she will use in her class.K may deduct the cost of traveling to Europe as an education or business expense.

Question 15

F, a landscape architect for an urban firm, commutes seven miles to her office.She is transferred to a branch office and must now commute 32 miles from home.If she moves to the suburbs, she will have moved 43 miles.She can deduct her moving expenses.

Question 16

B works for AC Manufacturing Co.as a janitor.Due to new federal regulations regarding plant safety, AC has required that all janitors take a night class in occupational safety at a local trade school.Although B would be happy to take the class and keep his current position, he has learned that by completing the course he will be eligible to be considered for a supervisory janitor position.B wants to deduct the cost of attending the night school class, which is not reimbursed to him.Ignoring the special deduction for qualified tuition, which statement best describes the deductibility of the cost?

A)B may not deduct the cost of the night school class if the supervisory position is considered a change in duties.
B)B may not deduct the cost of the night school class if it is not necessary to meet the minimum educational requirements of B's trade or business.
C)B may not deduct the cost if the education qualifies B for a new trade or business.
D)B may not deduct the cost if the education merely maintains his current skills.

Question 17

D is employed by MH&G public accountants.While at an out-of-town continuing education course held by the firm, he incurred meal expenses that were less than the amount he was reimbursed.D is reimbursed under a per diem scheme that provides for reimbursements not greater than certain amounts prescribed by the IRS.D must return the excess for the reimbursement arrangement to qualify as an accountable plan.

Question 18

S is employed by Clips, a large discount office supply store.She spends most of her time on the road, seeing customers.The company does not provide her with an office so she has set up a home office.She uses her home office about 10 hours a week to write-up orders, receive and return phone calls (obviously a critical part of her job), and shuffle paper.Based on the IRS's interpretation of the Soliman decision, S would be allowed a deduction for her home office.

Question 19

V is a district supervisor for several grocery stores.He is a native of Indianapolis and maintains his residence there.His primary responsibility, however, is for Louisville and the surrounding area.V spends virtually all of his time working in the Louisville area.While working in and around Louisville he incurred the following expenses: BW Motel, $1,250; ZK Motel, $1,400; LL Motel, $750 (total motel expense $3,400), and meals, $200.If V is audited, a deduction for the meals and lodging would be allowed.

Question 20

On instructions from his employer, Z traveled from Atlanta to London on a business trip.Z had no desire for a vacation at that time.Z flew round-trip at a cost of $570.Once in London, though, he decided to do some sight-seeing.As a result, he conducted business on five days and engaged in personal activities for three days.Z can deduct only a portion of the travel costs to and from London.

Question 21

R, an employee, spends $2,500 on business entertainment for which he is not reimbursed.If his A.G.I.is $60,000 (assuming no other miscellaneous itemized deductions), his deduction would be

A)$50
B)$100
C)$200
D)$800
E)None of the above

Question 22

At a business lunch to entertain a new client, J spent $40 for the meal, $4 tax, $6 tip, and $10 cab fare.Assuming he is not reimbursed, what is the allowable deduction?

A)$0
B)$25
C)$30
D)$44
E)Some other amount

Question 23

M works for MND Corporation, whose headquarters are in downtown Houston.The firm reassigned M to the real estate division, Woodacres, whose offices are in a nearby suburb, Conroe.The distance between the two jobsites is 43 miles.While M was working downtown it was 4 miles from his home to the office but the Woodacres office was 40 miles from M's home.M decided that 40 miles was too far to commute, so early in 2012 he moved 25 miles to a new house that was 19 miles from the Woodacres jobsite and 29 miles from the downtown jobsite.The travel distance that determines whether or not M's moving expenses are deductible is

A)19
B)25
C)36
D)40
E)43

Question 24

B is a computer systems analyst for IBM Corporation living and working in Dayton, Ohio.During the year, she drove to Cincinnati to help C with problems he was having on a recently purchased system.B spent the night in Cincinnati and ate by herself, spending $30 for dinner including $4 for a tip and $1 in tax.Under her per diem arrangement, she was reimbursed $20 for her meal.B's deduction, before application of the 2 percent of A.G.I.limitation for miscellaneous itemized deductions, is

A)$20
B)$24
C)$25
D)$28
E)$30

Question 25

R and S moved 1,400 miles from Bartlesville, Oklahoma to Boston, Massachusetts.Assuming the couple qualifies for the moving expense deduction, which of the following is not deductible at least in part?

A)Forfeited security deposit for early termination of lease in Oklahoma
B)Real estate commission to obtain a new apartment in Massachusetts
C)Cost of second trip to Boston to find a house
D)Meals at the temporary residence in Boston
E)None of the above is deductible

Question 26

When J became a partner in the public accounting firm of PL&A, he was required to obtain a membership at a country club.During the year, he spent $5,000 for dues.His records indicate that he used the club as follows: Business meals $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ 40 days
Substantial business discussions at the office followed by golf at the
club $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ 100 days
Personal use $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ 60 days J.may deduct dues of

A)$0
B)$800
C)$1,600
D)$2,800
E)$4,000

Question 27

J.B., a self-employed taxpayer, acquired a car this year and uses the standard mileage method to compute her deduction for automobile expenses.During the year, J.B.drove 50,000 miles: 40,000 for business and 10,000 for personal purposes.Other expenses related to the car that she has brought to her tax advisor's attention include insurance of $400, parking on business calls of $50, and interest on debt incurred to purchase the car of $1,000.What is J.B.'s deduction for automobile expenses (assume the mileage rate is .50 cents per mile for all units)?

A)$20,050
B)$20,850
C)$23,250
D)$21,160
E)Some other amount

Question 28

R, a museum director, timed a business trip to Egypt to coincide with a trip to the Pyramids organized by her college's Alumni Association.She spent 14 days on business and seven days sight-seeing at the Pyramids.Air fare was $1,500, and lodging plus 50 percent of R's meal costs totaled $75 a day.She can deduct

A)$1,000
B)$1,050
C)$2,050
D)$3,050

Question 29

J graduated from the University of Texas during the current year and accepted a job in Kansas City.J lived in Austin and moved to Kansas City to commence work on June 1.J drove 700 miles pulling a trailer with all of his belongings.J had rented the trailer for $200.On June 1 he moved into an apartment and lived there temporarily at a cost of $10 per day through July 15.On July 16 he moved into his new house.J will be able to claim a moving expense deduction of

A)$0
B)$333
C)$200
D)$632
E)$782

Question 30

R is employed as a painter for Painting-We-R.He lives in Dallas and works on jobs in the surrounding area.

Question 31

F, a news reporter, switched jobs and began working for station KNEE in San Diego, California on January 1.Four scenarios are given below.Assuming F otherwise qualifies for the moving expense deduction for expenses incurred to move to San Diego, in which of the following cases would the deduction be allowed?

Question 32

In which case are expenses not deductible on account of the directly-related-to and associated-with tests for entertainment expense?

A)Meal expense for client J and spouse at a business lunch
B)Cost of seven kegs of beer and 200 hot dogs for the annual company picnic for employees and their families
C)Cost of wine and cheese to be distributed free to guests and prospective buyers at a gallery opening
D)Cost of a two-week vacation trip to Hawaii for the company's top salesperson, who reports the value of the trip as taxable compensation
E)All of the above are deductible.

Question 33

L flew from Chicago to Miami primarily for a business meeting.The meeting lasted three days, so she stayed in Miami for two additional days to enjoy the sunshine and visit.With respect to the plane fare for the trip, L should

A)Prorate the plane fare based on time devoted to business and personal activities and deduct the business portion
B)Divide the plane fare equally between business and personal activities and deduct the business portion
C)Deduct the entire plane fare
D)Deduct none of the plane fare
E)None of the above

Question 34

C obtained a new job in Alaska with H&J Engineering.She incurred the following moving expenses: Transportation of furniture and household goods $\quad$$\$ 1,000$
House-hunting trip $\quad$$\quad$$\quad$$\quad$$\quad$ 1,900
Attorney's fees on sale of former residence $\quad$$\quad$$\quad$$\quad$ 1,400 Assuming C is eligible to deduct her moving expenses, what is the amount of the deduction?

A)$1,000
B)$2,900
C)$3,400
D)$3,900
E)$4,400

Question 35

R coaches the basketball team at Houston High School.In preparation for the state playoffs he decided to scout his probable opponent, which was playing in San Antonio.On Friday afternoon, he left from school and drove to San Antonio to watch the game.Later that night he returned to school to work on plans for the upcoming game.He incurred the following costs: transportation, $25; meals, $5.The costs were not reimbursed.The coach may deduct

A)$20
B)$24
C)$25
D)$29
E)$30

Question 36

An aggressive young attorney is an employee of a small law firm that provides him with an adequate office.He uses the den in his home to prepare legal briefs and review legal documents related to his employment.Assuming the attorney lives near the firm's office and he has easy access to the office at all times, which of the following statements most accurately describes the deductibility of the home office expenses incurred by the attorney?

A)If the den is used exclusively for business purposes, the expenses are deductible.
B)If the den is used exclusively for business purposes on a regular basis, the expenses are deductible.
C)If the den is used exclusively for business purposes on a regular basis to work for and see clients, the expenses are deductible.
D)In this situation the expenses are not deductible.
E)The home office deduction was completely eliminated as a result of the Tax Reform Act of 1976.

Question 37

K exclusively uses a portion of his bedroom as a place to manage his few investments.He charts his stocks daily.Costs allowable to the home office are $1,000.Gross income from his investments is $800, while his A.G.I., including the investment income, is $30,000.The amount K may deduct from his A.G.I.is

A)$0
B)$200 for A.G.I.
C)$400 for A.G.I.
D)$800 from A.G.I.
E)$1,000 from A.G.I.

Question 38

S maintains a principal residence in St.Louis, Missouri.He lays brick for a living.S's employer asked him to go to Chicago, Illinois to work on a single job for six months.Due to difficulties with weather, S was forced to stay in Chicago for a total of 11 months.S wants to deduct a portion of the cost of meals and lodging in Chicago while on the job.S will be

A)Denied the deduction because the job in Chicago was only a temporary assignment
B)Allowed the deduction because the job in Chicago will be considered temporary, as it was not an indefinite assignment
C)Allowed the deduction because the job in Chicago will be considered indefinite, as it was not a temporary assignment
D)Denied the deduction because living expenses are always nondeductible personal expenses

Question 39

T sold textbooks for a living by visiting different teaching institutions and showing samples of various books to professors.She typically carried about 100 books in her Volkswagen on her way from home to various local universities that she regularly called upon.Last year a sudden increase in the number of textbooks revised caused T to increase her quantity of samples from 100 to 300 books.To carry all of the books, T rented a trailer that she pulled behind her Volkswagen.T sought to deduct the cost of the trailer on her tax return.T will

A)Be allowed to deduct the cost of the trailer as an additional cost attributable to carrying the items that T needs for the cost of doing business normally
B)Not be allowed to deduct the cost of the trailer.However, T could have deducted the additional cost of hauling the new books if she had bought a larger car and used the "same mode" of transporting them as before
C)Not be allowed to deduct the cost of the trailer because T is still essentially using the "same mode" of hauling books as before, i.e., with a car
D)Be allowed to deduct the cost of renting the trailer because she is not using the "same mode" of hauling the new books that she used for the old ones

Question 40

Which of the following conditions must be satisfied to establish that an entertainment expense was directly related to business?

A)More than a general expectation of deriving some income (other than good will) existed as a result of making the expenditure.
B)Business was actually discussed or engaged in during the entertainment.
C)The combined business and entertainment was principally characterized as business.
D)More than one but not all of above must be satisfied.
E)All of the above must be satisfied.