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Exam 11: Individuals As Employees and Proprietors

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Question 41

True/False

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After graduating from college with a degree in chemistry,Alberto obtains a job as a chemist with DuPont.Alberto's job search expenses qualify as deductions.

A) True
B) False

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Question 42

Multiple Choice

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The de minimis fringe benefit:

A) Exclusion applies only to property received by the employee.
B) Can be provided on a discriminatory basis.
C) Exclusion is limited to $250 per year.
D) Exclusion applies to employee discounts.
E) None of these.

F) C) and D)
G) A) and B)

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Question 43

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

Adam repairs power lines for the Egret Utilities Company.He is generally working on a power line during the lunch hour.He must eat when and where he can and still get his work done.He usually purchases something at a convenience store and eats in his truck.Egret reimburses Adam for the cost of his meals.

A U.S.citizen worked in a foreign country for the period July 1,2014 through August 1,2015.Her salary was $10,000 per month.Also,in 2014 she received $5,000 in dividends from foreign corporations (not qualified dividends) .No dividends were received in 2015.Which of the following is correct?

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.

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.

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.

The employees of Mauve Accounting Services are permitted to use the copy machine for personal purposes,provided the privilege is not abused.Ed is the president of a civic organization and uses the copier to make several copies of the organization's agenda for its meetings.The copies made during the year would have cost $150 at a local office supply.

Liam just graduated from college.Because it is his first job,the cost of moving his personal belongings from his parents' home to the job site does not qualify for the moving expense deduction.

During the current year,Eleanor earns $120,000 in wages as an employee of an accounting firm.She also earns $13,000 in gross income from an outside consulting service she operates.Deductible expenses paid in connection with the consulting service amount to $3,000.Eleanor also has a recognized long-term capital gain of $1,000 from the sale of a stock investment.She must pay a self-employment tax on:

The Royal Motor Company manufactures automobiles.Non-management employees of the company can buy a new automobile for Royal's cost plus 2%.The automobiles are sold to dealers at cost plus 20%.Generally,management employees of Local Dealer,Inc. ,are allowed to buy a new automobile from the company at the dealer's cost.Which of the following statements is correct?

If the cost of uniforms is deductible,their maintenance cost (e.g. ,laundry,dry cleaning,alterations)also is deductible.

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

Julie was suffering from a viral infection that caused her to miss work for 90 days.During the first 30 days of her absence,she received her regular salary of $8,000 from her employer.For the next 60 days,she received $12,000 under an accident and health insurance policy purchased by her employer.The premiums on the health insurance policy were excluded from her gross income.During the last 30 days,Julie received $6,000 on an income replacement policy she had purchased.Of the $26,000 she received,Julie must include in gross income:

Nicole's employer pays her $150 per month towards the cost of parking near a railway station where Nicole catches the train to work.The employer also pays the cost of the rail pass,$75 per month.Nicole can exclude both of these payments from her gross income.

If a taxpayer does not own a home but rents an apartment,the office in the home deduction is not available.

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

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

On their birthdays,Lily sends gift certificates (each valued at $25)to Caden (a key client)and to each of Caden's two minor children.Lily can deduct only $25 as to these gifts.