Question 1

Bob lives and works in Newark,NJ.He travels to London for a three-day business meeting,after which he spends six days touring Scotland.All of his air fare is deductible.

Accepted Answer

Only the airfare related to the business portion of the trip is deductible. The portion related to personal travel, such as touring Scotland, is not deductible.

Question 2

Alexis (a CPA and JD)sold her public accounting practice in Des Moines and accepted a job with the Seattle office of a national law firm.Her moving expenses are not deductible because she has changed employment status (i.e. ,went from self-employed to employee)and changed occupations (i.e. ,practice of public accounting to practice of law).

Accepted Answer

Moving expenses may still be deductible if the new job is at least 50 miles farther from the old home than the old job location was from the old home, regardless of the change in employment status or occupation. Therefore, Alexis may be able to deduct her moving expenses depending on the specific details of her situation.

Question 3

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

Accepted Answer

Taxpayers who claim the standard deduction can still benefit from education expenses through various tax credits and deductions such as the Lifetime Learning Credit, the American Opportunity Tax Credit, and the Tuition and Fees Deduction.

Question 4

Lloyd,a practicing CPA,pays tuition to attend law school.Since a law degree involves education leading to a new trade or business,the tuition is not deductible.

Accepted Answer

This statement is incorrect. According to IRS rules, if a taxpayer (such as Lloyd) is already working in a certain trade or business (in this case, as a CPA) and pays for education to maintain or improve skills in that trade or business, the tuition may be deductible. However, if the education is for a new trade or business (such as pursuing a law degree when the taxpayer is not already working as a lawyer), then the tuition is not deductible.

Question 5

A taxpayer takes six clients to an NBA playoff game.If all of the tickets (list price of $120 each)are purchased on the Internet for $1,800 ($300 each),only $150 ($300 * 50% cutback adjustment)per ticket is deductible.

Accepted Answer

The answer of A taxpayer takes six clients to an...

Question 6

An education expense deduction can be allowed even if the education results in a promotion or pay raise for the employee.

Accepted Answer

The IRS allows for an education expense deduction even if the education results in a promotion or pay raise for the employee. However, the education must be related to the employee's current job or maintain or improve skills needed in that job.

Question 7

Kelly,an unemployed architect,moves from Boston to Phoenix to accept a job as a chef at a restaurant.Kelly's moving expenses are deductible even though her new job is in a different trade or business.

Accepted Answer

Moving expenses are deductible if the move is closely related to the start of work at a new job location and the distance test is met. The distance test requires the new workplace to be at least 50 miles farther from the employee's former home than the old workplace was. There is no requirement that the new job be in the same trade or business as the old job. Therefore, Kelly's moving expenses are deductible as she is moving to start a new job in a different trade or business.

Question 8

Ethan,a bachelor with no immediate family,uses the Pine Shadows Country Club exclusively for his business entertaining.None of Ethan's annual dues for his club membership are deductible.

Accepted Answer

According to IRS regulations, club dues are only deductible if they are directly related to the taxpayer's trade or business. Since Ethan is using the club exclusively for business entertaining, his dues would be deductible if they were related to that business. However, since he has no immediate family and is not using the club for personal purposes, none of his dues are deductible.

Question 9

Tired of her 60 mile daily commute,Margaret purchases a condo that is only five miles from her job.Margaret's moving expenses to her new condo are allowed and can be claimed by her as a deduction.

Accepted Answer

The answer of Tired of her 60 mile daily commute,Margaret...

Question 10

There is no cutback adjustment for meals and entertainment as to employees who are subject to regulation by the U.S.Department of Transportation.

Accepted Answer

The answer of There is no cutback adjustment for meals...

Question 11

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

Accepted Answer

According to IRS Publication 970, meals and lodging expenses can be deductible education expenses if they are necessary for the taxpayer to attend education-related conferences or courses away from their regular place of work. However, there are specific requirements that must be met for these expenses to qualify, such as being primarily for the benefit of the taxpayer's employer or enhancing their skills in their current job.

Question 12

In May 2010,after 11 months on a new job,Ken is fired after he assaults a customer.Ken must include in his gross income for 2010 any deduction for moving expenses he may have claimed on his 2009 tax return.

Accepted Answer

The answer of In May 2010,after 11 months on a...

Question 13

Daniel just graduated from college.The cost of moving his personal belongings from his parents' home to his first job site qualifies for the moving expense deduction.

Accepted Answer

The cost of moving personal belongings from a previous residence to a new job location can qualify for the moving expense deduction, as long as certain criteria are met such as distance and time requirements. Therefore, Daniel may be able to claim this deduction if he meets the necessary qualifications.

Question 14

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

Accepted Answer

A moving expense deduction is allowed if the taxpayer starts a new job and meets the time and distance tests, even if they did not have a job at the time of the move.

Question 15

A sole proprietor is not allowed a deduction for a $25 gift he gives to his office manager on her birthday.

Accepted Answer

The sole proprietor is allowed a deduction for business expenses, including gifts to employees up to $25 per recipient per year. Therefore, he can deduct the $25 gift he gave to his office manager on her birthday.

Question 16

Crow Corporation pays for a trip to Bermuda for its two top salespersons.This expense is not subject to the cutback adjustment.

Accepted Answer

The expense for the trip to Bermuda is not subject to the cutback adjustment, which means it won't be reduced or eliminated as part of cost-cutting measures.

Question 17

Every year,Penguin Corporation gives each employee a fruit basket and a bottle of wine at Christmas.These gifts are not subject to the cutback adjustment.

Accepted Answer

The statement explicitly states that the gifts are not subject to cutback adjustment.

Question 18

Mallard Corporation furnishes meals at cost to its employees by means of a cafeteria it maintains.The cost of operating the cafeteria is not subject to the cutback adjustment.

Accepted Answer

The fact that the cost of operating the cafeteria is not subject to the cutback adjustment means that it is a qualified plan under the Internal Revenue Code. Therefore, Mallard Corporation can provide meals to its employees at cost without violating any tax regulations.

Question 19

Edna lives and works in Cleveland.She travels to Berlin for a nine-day business meeting,after which she spends four days touring Germany.All of Edna's airfare is deductible.

Accepted Answer

Only the portion of Edna's airfare related to the business meeting is deductible, not the personal travel portion.

Question 20

In November 2010,Katie incurs unreimbursed moving expenses to accept a new job.Katie can deduct any of these expenses when she timely files her 2010 income tax return even though she has not yet satisfied the 39-week time test.

Accepted Answer

According to IRS Publication 521, unreimbursed moving expenses can be deducted even if the taxpayer has not satisfied the 39-week time test, as long as the expenses were incurred in connection with starting a new job. However, if the taxpayer does not meet the time test, they may need to include the amount of the deduction as income in a later year if they do not meet the test.

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