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

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Question 21

True/False

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A statutory employee is not a common law employee but is subject to Social Security tax.

A) True
B) False

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Question 22

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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.

A) True
B) False

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Question 23

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Which, if any, of the following is an advantage of using the simplified method for determining the office in the home deduction?

A taxpayer who maintains an office in the home to conduct his only business will not have nondeductible commuting expense.

Jordan performs services for Ryan. Which, if any, of the following factors indicate that Jordan is an independent contractor, rather than an employee?

Ashley and Matthew are husband and wife and both are practicing CPAs. On a joint return, Ashley gets to deduct her professional dues but Matthew does not. Explain.

A self-employed taxpayer who lives and works in Kansas City travels to Chicago on an eight-day business trip. While in Chicago, taxpayer uses the hotel valet service to have some laundry done. The valet charge is a nondeductible personal travel expense.

Christopher just purchased an automobile for $40,000 which he plans to claim 100% as being for business use. In order to take advantage of MACRS and § 179, he plans to use the actual cost method for determining his deduction in the first year. In subsequent years, he will switch to the automatic mileage method. Comment on Christopher's proposed approach.

In choosing between the actual expense method and the automatic mileage method, a taxpayer should consider the cost of insurance on the automobile.

Meg teaches the fifth grade at a local school. During the year, she spends $1,200 for school supplies for use in her classroom. On her income tax return, some of this expense is not reported and the balance is deducted in two different places. Explain what has probably happened.

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

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

A taxpayer who always claims the standard deduction i.e., does not itemize his or her deductions from AGI) may still be able to receive a tax benefit from any education expenses incurred.

Statutory employees:

Which, if any, of the following factors is not a characteristic of independent contractor status?

Which of the following expenses, if any, qualify as deductible in 2018?

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.

Eileen lives and works in Mobile. She travels to Rome for an eight-day business meeting, after which she spends two days touring Italy. All of Eileen's airfare is deductible.

Jake performs services for Maude. If Maude provides a helper and tools, this is indicative of independent contractor rather than employee) status.

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