Question 1

Julian and Deloris move during the current year from their home in Houston to Santa Fe. Julian was a rocket scientist with NASA in Houston and has accepted a new job with the Los Alamos research lab near Santa Fe. Moving expenses and reimbursement information are presented below. • Direct costs of moving themselves, furnishings and other personal belongings to Santa Fe total $8,000.
• A house-hunting trip before their move to Santa Fe resulted in the total costs of $2,500.
• Julian and Deloris incurred commissions and legal costs in the amount of $12,000 in conjunction with the sale of their Houston residence.
• Los Alamos research laboratories reimbursed Julian and Deloris for $5,000 of their moving costs. What is their Moving Expense deduction?

Accepted Answer

The moving expense deduction is limited to the direct costs of moving, which are $8,000. After subtracting the $5,000 reimbursement, the deductible amount is $3,000. House-hunting and selling costs are not deductible.

Question 2

Sally and Kelly are both enrolled in a graduate accounting course at Deacon University. Discuss how it is possible that Sally can deduct the cost of her tuition as an education expense while Kelly's tuition is not deductible.

Accepted Answer

The answer of Sally and Kelly are both enrolled in...

Question 3

Which of the following is are) correct concerning the time test for deducting moving expenses? I. Self-employed individuals must work in the new location for 39 weeks during a 2-year period. II. A transfer of the employee by the employer waives the time requirement.

Accepted Answer

The answer of Which of the following is are) correct...

Question 4

Jay obtains a new job in Boston and moves from Reno during the current year. He incurs the following moving expenses:  What is Jay's moving expense deduction?

Accepted Answer

The answer of Jay obtains a new job in Boston...

Question 5

Roscoe is a religion professor. During the summer, he spends 3 months in Israel touring historical landmarks. The cost of the summer trip includes $1,300 for airfare, $2,750 for lodging, $1,175 for meals, and $850 for incidental expenses. The following semester he incorporates many of the items he collected and the knowledge he gained from his experiences into his lectures. How much of the travel costs can Roscoe deduct? Explain.

Accepted Answer

The answer of Roscoe is a religion professor. During the...

Question 6

Assume Sergio is a business associate of Edward's. Edward loans Sergio the $5,000 to pay off some gambling debts. Edward owns a meat packing plant.

Accepted Answer

The answer of Assume Sergio is a business associate of...

Question 7

Jerry recently graduates with an MBA degree from a leading university and will be going to work as an employee of a major stock brokerage firm. Jerry is unsure of the circumstances under which he can legitimately deduct the costs of entertaining and dining with clients and prospective clients. Jerry will spend approximately $5,000 a year on such activities for which he will not be reimbursed. It is important that he be able to derive tax benefit for these costs. Advise Jerry of the general rules in this area of the tax law. Include a brief discussion of substantiation requirements for such business expenses.

Accepted Answer

The answer of Jerry recently graduates with an MBA degree...

Question 8

Walter is a cash basis taxpayer with a drapery cleaning business. In the current year he determines he will never receive payment from Davis for cleaning services provided to Davis. Can Walter record a deduction for the bad debt? Explain.

Accepted Answer

The answer of Walter is a cash basis taxpayer with...

Question 9

Carla changes jobs during the year and moves from Oklahoma City to Orlando. Which of the following expenses relating to the move can Carla deduct? I. Upon arriving in Orlando, her apartment is not ready so she spends 2 nights in a local hotel. II. Gas and tolls during the move to Orlando.

Accepted Answer

The answer of Carla changes jobs during the year and...

Question 10

Amanda is the president and 60% owner of ANR, a closely held corporation. During the year, she is paid a salary of $650,000. Her salary is 40% higher than that for executives of comparably sized companies in the industry. ANR has experienced 4 straight years of increased sales growth, at 3% per year, while other companies in the industry have experienced decreasing or level sales. Discuss what factors are used to determine whether Amanda's salary represents reasonable compensation.

Accepted Answer

The answer of Amanda is the president and 60% owner...

Question 11

Thomas changes jobs during the year and moves from Philadelphia to El Paso. Which of the following expenses relating to the move can Thomas deduct? I. Prior to the move, Thomas flies to El Paso to find an apartment. II. The cost of meals while driving his household goods to El Paso.

Accepted Answer

The answer of Thomas changes jobs during the year and...

Question 12

Phong is a life insurance salesman for Swan Insurance and spends 4 days a month in the office. His office is 12 miles from home. He also has a part-time job as a salesman in a clothing store. Typically, he works 2 nights during the week and 1 day on the weekend. The clothing store where he works is 6 miles from his office and 7 miles from his home. What portions) of Phong's travel is are) considered business?

Accepted Answer

The answer of Phong is a life insurance salesman for...

Question 13

Sita loans her next-door neighbor, Ivan, $800 to pay his rent and cover his utilities for last month. Ivan promises Sita he will repay her at the end of next month when he receives his next payroll check. Two weeks after loaning Ivan the money, Sita discovers Ivan had left town. No one knows his whereabouts. Sita is told that Ivan also hasn't paid his rent or utility bills. Discuss whether Sita can deduct the $800. Completely explain your reasoning.

Accepted Answer

The answer of Sita loans her next-door neighbor, Ivan, $800...

Quiz 6: Business Expenses