Question 1

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 2

A taxpayer who claims the standard deduction may be able to claim an office in the home deduction.

Accepted Answer

Yes, a taxpayer who claims the standard deduction may still be able to claim an office in the home deduction if they qualify for it based on the requirements set by the IRS.

Question 3

There are three limitations on the qualified business income deduction: an overall limitation (based on modified taxable income), another that applies to high income taxpayers, and a third that applies to certain types of services businesses.

Accepted Answer

This statement correctly describes the three limitations on the qualified business income deduction.

Question 4

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 5

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 6

One of the purposes of the qualified business income deduction was to reduce the taxes on businesses that are operating in noncorporate business forms (e.g., sole proprietors, partnerships, and S corporations).

Accepted Answer

The qualified business income deduction was created to allow for a 20% deduction on the qualified business income of taxpayers who work in noncorporate business forms. This deduction was meant to reduce the effective tax rate for these businesses and encourage entrepreneurship.

Question 7

For self-employed taxpayers, travel expenses are deductions for AGI.

Accepted Answer

Travel expenses, such as transportation, lodging, and meals, incurred by self-employed taxpayers for business purposes are considered deductions for AGI. This means that they can be deducted from gross income to arrive at adjusted gross income (AGI) on the tax return.

Question 8

The Federal per diem rates that can be used for "deemed substantiated" purposes are the same for all locations in the country.

Accepted Answer

The Federal per diem rates vary by location to account for differences in living costs across various parts of the country.

Question 9

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 the IRS, if the portion of the home office deduction exceeds the income from the business, the excess can be carried over to future tax years under the actual expense method. This carryover provision does not apply to the simplified method.

Question 10

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

Under the simplified method, the maximum office in the home deduction is $1,500, calculated as the office square feet (up to 300 square feet) × $5, with no option to claim more than this amount.

Question 11

Every year, Teal Corporation gives each employee a turkey and a bottle of wine during the December holiday season. These gifts are subject to the 50% limitation.

Accepted Answer

The gifts given by Teal Corporation, a turkey and a bottle of wine, during the December holiday season are considered de minimis fringe benefits and are not subject to the 50% limitation. The 50% limitation generally applies to meals and entertainment expenses, not to nominal value gifts to employees.

Question 12

By itself, credit card receipts will not constitute adequate substantiation for travel expenses.

Accepted Answer

According to IRS regulations, credit card receipts alone do not provide sufficient evidence of travel expenses. Additional documentation, such as an itemized hotel bill or receipts for meals and transportation, are required to substantiate these expenses.

Question 13

Employees who render an adequate accounting to employers and are fully reimbursed will shift the 50% overall limitation on meal expenses to their employer.

Accepted Answer

When employees provide an adequate accounting of their meal expenses to their employer and the employer fully reimburses them, the 50% overall limitation on meal expenses is shifted from the employee to the employer. This means the employer can deduct the full cost of the meals as a business expense on their taxes.

Question 14

Code § 199A permits an individual to deduct 25% of the qualified business income generated through a sole proprietorship, a partnership, or an S corporation.

Accepted Answer

Section 199A allows individuals to deduct up to 20% of their qualified business income (QBI) from a partnership, S corporation, or sole proprietorship, along with 20% of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income.

Question 15

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 rules, if a portion of the home is used as a daycare facility, the exclusive use requirement does not apply for that portion of the home. This means that the home office deduction may be claimed even if the space is also used for personal purposes, such as caring for children.

Question 16

When contributions are made to a traditional IRA, they are deductible by the participant. Later distributions from the
IRA upon retirement are fully taxed.

Accepted Answer

Contributions to traditional IRAs are tax-deductible, but distributions taken in retirement are taxed as ordinary income.

Question 17

For tax year 2019, Taylor used the simplified method of determining her office in the home deduction. For 2020, Taylor must continue to use the simplified method and cannot switch to the regular (actual expense) method.

Accepted Answer

Taylor can choose each tax year whether to use the simplified method or the regular method for calculating her home office deduction. The choice is not locked in based on the method used in a previous year.

Question 18

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

Accepted Answer

Both traditional and Roth IRAs allow for tax-free accumulation of income within the plan. However, they have different tax treatments for contributions and withdrawals.

Question 19

A qualified trade or business includes any trade or business including providing services as an employee.

Accepted Answer

A qualified trade or business under the IRS guidelines specifically excludes the trade or business of performing services as an employee.

Question 20

Qualified business income (QBI) is defined as the ordinary income less ordinary deductions a taxpayer earns from a qualified trade or business (e.g., from a sole proprietorship, S corporation, or partnership) conducted in the United States by the taxpayer.

Accepted Answer

Qualified business income is defined as ordinary income less ordinary deductions from a qualified trade or business conducted in the United States by the taxpayer, as specified in the Tax Cuts and Jobs Act (TCJA) of 2017.

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