Question 1

Taxpayers may use the standard mileage rate method when five vehicles are used simultaneously for business.

Accepted Answer

The IRS does not allow the standard mileage rate method when five or more vehicles are used simultaneously for business purposes.

Question 2

Carol,a self-employed CPA,purchases hockey tickets online for $180 and takes a client to the game.Immediately before the game,Carol and the client dine on chicken wings and other food and beverages at the restaurant in the arena,and Carol charges the full $120 bill for dinner on her credit card.During dinner,and at various points throughout the game,they discuss an ongoing project Carlos is working on for the client and a potential new project.Carol will deduct

Accepted Answer

Carol can deduct 50% of the meal expenses as a business expense, which is $60 (50% of $120). The cost of the hockey tickets is not deductible as it is considered entertainment.

Question 3

Costs associated with commuting to and from a business location is a deductible expense.

Accepted Answer

Commuting to and from a business location is considered a personal expense and is not a deductible expense for tax purposes. However, if the commute is between two different work locations, such as driving from one office to another, the expenses may be deductible.

Question 4

David acquired an automobile for $30,000 for use in his unincorporated business at the beginning of 2019 and used the standard mileage rate method in 2019.He plans to switch to the actual expense method for 2020.The automobile was used 25,000 miles for business purposes in 2019.What is the amount of the adjusted basis of the automobile for purposes of computing depreciation in 2020?

Accepted Answer

The adjusted basis is calculated by subtracting the depreciation component of the standard mileage rate from the original cost. In 2019, the depreciation component was $0.26 per mile. Therefore, 25,000 miles x $0.26 = $6,500. The adjusted basis is $30,000 - $6,500 = $23,500.

Question 5

Clarissa is a very successful self-employed real estate attorney.She spends $5,000 per year taking her clients out to dinner upon completion of a sale.Unfortunately,Clarissa is not a good recordkeeper and does not maintain receipts.However,such meals are standard practice in her field,and trade journals indicate that $5,000 is a reasonable amount for a successful high-end attorney.Clarissa will be allowed to deduct $2,500.

Accepted Answer

The answer of Clarissa is a very successful self-employed real...

Question 6

Chelsea,who is self-employed,drove her automobile a total of 20,000 business miles in 2019.This represents about 75% of the auto's use.She has receipts as follows: $$\begin{array} {| l | r |} 
\hline \text { Parking (business only) } & \$ 500 \
\hline \text { Tolls (business only) } & 200 \
\hline \text { Repairs } & \$ 1,000 \
\hline
\end{array}$$ Chelsea uses the standard mileage rate method.She can deduct

Accepted Answer

The standard mileage rate for 2019 is $0.58 per mile. Chelsea can deduct 20,000 miles x $0.58 = $11,600 for mileage. Additionally, she can deduct parking and tolls for business use, which are $500 + $200 = $700. Total deduction is $11,600 + $700 = $12,300.

Question 7

Joe is a self-employed tax attorney who frequently entertains his clients at his country club.Joe's club expenses include the following: $$\begin{array} { | l | r | } 
\hline \text { Annual dues } & \$ 5,400 \
\hline \text { Golfing fees with clients } & 1,200 \
\hline \text { Charges for personal meals with his family } & 3,100 \
\hline \text { Meal charges related to hosting meetings with clients } & 4,000 \
\hline
\end{array}$$ Assuming proper documentation is maintained,Joe may deduct

Accepted Answer

The answer of Joe is a self-employed tax attorney who...

Question 8

Norman,a self-employed lawyer,traveled to San Francisco for four days on vacation,and while there spent another two days conducting business.Norman's plane fare for the trip was $500; meals cost $150 per day; hotels cost $300 per day; and a rental car cost $150 per day that was used for all six days.Norman may deduct

Accepted Answer

Norman can deduct expenses related to the business portion of his trip. He spent 2 days on business, so he can deduct 2/6 of the plane fare ($500 * 2/6 = $166.67), 50% of meals for 2 days (2 * $150 * 50% = $150), hotel for 2 days (2 * $300 = $600), and the rental car for 2 days (2 * $150 = $300). Total deductible expenses: $166.67 + $150 + $600 + $300 = $1,216.67, rounded to $1,217.

Question 9

A self-employed consultant takes a client to a major league football game to propose a new consulting engagement.Assuming appropriate documentation is maintained,the individual will receive a deduction for AGI for 50% of the ticket cost.

Accepted Answer

Entertainment expenses, such as tickets to sporting events, are generally not deductible for tax purposes under the Tax Cuts and Jobs Act of 2017.

Question 10

Lokesh,a self-employed taxpayer,recently returned from a business conference out of town.Unfortunately,due to a malware attack on his system,he has lost his hotel and meal receipts.Due to the lack of receipts,Lokesh will not be able to deduct his hotel and meals.

Accepted Answer

Self-employed individuals can still claim deductions for travel expenses like hotel and meals if they can provide other evidence, such as credit card statements or a detailed log, to substantiate the expenses.

Question 11

Gayle,a doctor with significant investments in the stock market,traveled on a cruise ship to Bermuda.Investment specialists provided daily seminars which Gayle attended.The cost of the cruise for four days is $2,500.Gayle can deduct (before application of any floors)

Accepted Answer

The cost of the cruise is considered a personal expense and is not deductible for tax purposes, even though Gayle attended investment seminars during the trip. Therefore, the answer is A) $0.

Question 12

A self-employed consultant takes a client to dinner to propose a new consulting engagement.Assuming appropriate documentation is maintained,the individual will receive a deduction for AGI for 50% of the meal cost.

Accepted Answer

The IRS allows a self-employed consultant to deduct 50% of the meal cost as long as it is considered an ordinary and necessary business expense and proper documentation is maintained.

Question 13

Rui,the sole proprietor of a CPA firm,is responsible for a large client base.She often drives to meetings at two different clients' offices in a single day.Rui can deduct the transportation costs of driving to the various client meetings.

Accepted Answer

As a sole proprietor, Rui can deduct the transportation costs of driving to the various client meetings as a business expense. However, she needs to keep accurate records of the mileage and purpose of each trip.

Question 14

If the standard mileage rate is used in the first year,the actual expense method may not be used in future years.

Accepted Answer

The actual expense method can be used in future years even if the standard mileage rate was used in the first year, but switching methods may have specific tax implications and requirements.

Question 15

Carlos,a self-employed CPA,entertains a client in a luxury box at the hockey game.Immediately before the game starts,while dining on chicken wings and other food and beverages,and at various points throughout the evening,they discuss an ongoing project Carlos is working on for the client and a potential new project.Carlos is billed a fixed $300 for the box for the evening,which includes the refreshments and the game tickets.Carlos estimates the cost of the refreshments at $100.Carlos will deduct

Accepted Answer

The answer of Carlos,a self-employed CPA,entertains a client in a...

Question 16

Generally,50% of the cost of business gifts is deductible up to $25 per donee per year for self-employed individuals.

Accepted Answer

The IRS allows a deduction of up to $25 per donee per year for business gifts, but it does not allow a 50% deduction on the cost of these gifts.

Question 17

Richard,a self-employed business consultant,traveled from New Orleans to New York for both business and vacation.He spent 4 days conducting business and some days vacationing.He incurred the following expenses:
Airfare $460
Lodging-per day 175
Meals-per day 100
Business Entertainment 800
What is his deduction under the following two circumstances?
a.He spends three days on vacation,in addition to the business days.
b.He spends six days on vacation,in addition to the business days.

Accepted Answer

The answer of Richard,a self-employed business consultant,traveled from New Orleans...

Question 18

Vincent,a self-employed taxpayer,travels to a business conference out of town.While at the conference,he spends $500 on breakfasts and dinners.Because he eats alone,he cannot deduct any of the meal costs.

Accepted Answer

Vincent may still be able to deduct 50% of the meal costs as a business expense, even if he ate alone. The IRS allows for this deduction if the meal was related to a business activity such as attending a conference. However, he would need to keep detailed records and receipts to support the deduction.

Question 19

Rajiv,a self-employed consultant,drove his auto 20,000 miles this year,15,000 to meetings with clients and 5,000 for commuting and personal use.The cost of operating the auto for the year was as follows: $$\begin{array} { | l | r | } 
\hline \text { Gasoline and repairs } & \$ 7,000 \
\hline \text { Insurance } & 1,000 \
\hline \text { Depreciation } & 4,000 \
\hline
\end{array}$$ Rajiv's AGI is $100,000 before considering the auto costs.Rajiv has used the actual cost method in the past.What is Rajiv's deduction for the use of the auto?

Accepted Answer

Rajiv's deduction for the use of the auto is $9,000, which is 75% of the total operating costs of $12,000. The 75% deduction is allowed because Rajiv used the auto 75% of the time for business purposes.

Question 20

Shane,a self-employed junior partner in a law firm,makes the following gifts with their values noted: $$\begin{array} { | l | r | } 
\hline \text { Managing partner in Shane's firm } & \$ 30 \
\hline \text { Shane's personal assistant } & 40 \
\hline 4 \text { clients } ( \$ 27 \text { each) } & 108 \
\hline
\end{array}$$ What amount of the gifts is deductible?

Accepted Answer

The total value of the gifts is $30 + $40 + $108 = $178. However, only gifts to clients are deductible, so the deductible amount is $108.

Quiz 23: Business Expenses and Deferred Compensation