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Exam 17: Individuals As Employees and Proprietors

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Question 41

Multiple Choice

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The § 222 deduction for tuition and related expenses is available:

A) Only if the taxpayer itemizes deductions from AGI.
B) To deduct that portion of the tuition in excess of that allowed under the lifetime learning credit.
C) To cover the tuition of a son who does not qualify as taxpayer's dependent.
D) Only if job related.
E) None of the above.

F) All of the above
G) None of the above

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Question 42

Multiple Choice

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In which,if any,of the following situations is the automatic mileage available?

A) A limousine to be rented by the owner for special occasions (e.g.,weddings,high school proms) .
B) The auto belongs to taxpayer's mother.
C) One of seven cars used to deliver pizzas.
D) MACRS statutory percentage method has been claimed on the automobile.
E) None of the above.

F) B) and C)
G) A) and E)

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Question 43

Multiple Choice

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The § 222 deduction for tuition and related expenses is available:

An individual is considered an active participant in an employer-sponsored retirement plan merely because an individual's spouse is an active participant for any part of a plan year in applying the IRA phase-out provision.

Felicia,a recent college graduate,is employed as an accountant by an oil company.She would like to continue her education and obtain a law degree.Discuss Felicia's tax status if she attends a local law school on a:

Qualified moving expenses include the cost of lodging but not meals during the move.

Under the right circumstances,a taxpayer's meals and lodging expense can qualify as a deductible education expense.

The plant union is negotiating with the Eagle Company,which is on the verge of bankruptcy.Eagle has offered to pay for the employees' hospitalization insurance in exchange for a wage reduction.The employees each currently pay premiums of $4,000 a year for their insurance.

Ben was hospitalized for back problems.While he was away from the job,he collected his regular salary from an employer-sponsored income protection insurance policy.Ben's employer-sponsored hospitalization insurance policy also paid for 90% of his medical expenses.Ben also collected on an income protection policy that he purchased.Which of the above sources of income are taxable? Explain the basis for excluding any item or items.

Janet,who lives and works in Newark,travels to Atlanta for a Thursday-Friday business conference.She stays over after the conference and visits relatives and friends on Saturday.Under certain circumstances,the meals and lodging expenses for Saturday can be considered as business related.

If an item such as property taxes and home mortgage interest exceed the income from a hobby,the excess amount of this item over the hobby income can be deducted if the taxpayer itemizes deductions.

Distributions from a Roth IRA that are subject to taxation are treated first as from earnings and last as from contributions.

Corey is the city sales manager for "RIBS," a national fast food franchise.Every working day,Corey drives his car as follows: Corey's deductible mileage is:

Regarding tax favored retirement plans for employees and self-employed persons,comment on the following:

Under the Swan Company's cafeteria plan,all full-time employees are allowed to select any combination of the benefits below,but the total received by the employee cannot exceed $8,000 a year. Which of the following statements is true?

A moving expense deduction is allowed even if at the time of the move the taxpayer did not have a job at the new location.

For a person who is in the 35% marginal tax bracket,$1,000 of tax-exempt income is equivalent to $1,350 of income that is subject to tax.

What are the relevant factors to be considered in determining whether an activity is profit-seeking or a hobby?

Louise works in a foreign branch of her employer's business.She earned $5,000 per month throughout the relevant period.

For tax purposes,"travel" is a broader classification than "transportation."