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Exam 11: Individuals As Employees and Proprietors

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Question 51

True/False

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

A) True
B) False

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Question 52

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An employee can exclude from gross income the value of meals provided by his or her employer whenever:

A) The meal is not extravagant.
B) The meals are provided on the employer's premises for the employer's convenience.
C) There are no places to eat near the work location.
D) The meals are provided for the convenience of the employee.
E) None of these.

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

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Question 53

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Sick of her 65 mile daily commute,Edna purchases a condo that is only four miles from her job.Edna's moving expenses to her new condo are not allowed and cannot be claimed by her as a deduction.

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

If a married taxpayer is an active participant in another qualified retirement plan,the traditional IRA deduction phaseout begins at $98,000 of AGI for a joint return in 2015.

After she finishes working at her main job,Ann returns home,has dinner,then drives to her second job.Ann may deduct the mileage between her first and second job.

Fresh Bakery often has unsold donuts at the end of the day.The bakery allows employees to take the leftovers home.The employees are not required to recognize gross income because the bakery does not incur any additional cost.

Under the regular (actual expense)method,the portion of the office in the home deduction that exceeds the income from the business can be carried over to future years.

Which,if any,of the following is subject to a cutback adjustment?

Employees of a CPA firm located in Maryland may exclude from gross income the meals and lodging provided by the employer while they were on an audit in Delaware.

All employees of United Company are covered by a group hospitalization insurance plan,but the employees must pay the premiums ($8,000 for each employee) .None of the employees has sufficient medical expenses to deduct the premiums.Instead of giving raises next year,United is considering paying the employee's hospitalization insurance premiums.If the change is made,the employee's after-tax and insurance pay will:

For tax year 2014,Taylor used the simplified method of determining her office in the home deduction.For 2015,Taylor must continue to use the simplified method and cannot switch to the regular (actual expense)method.

Ridge is the manager of a motel.As a condition of his employment,Ridge is required to live in a room on the premises so that he would be there in case of emergencies.Ridge considered this a fringe benefit,since he would otherwise be required to pay $800 per month rent.The room that Ridge occupied normally rented for $70 per night,or $2,100 per month.On the average,90% of the motel rooms were occupied.As a result of this rent-free use of a room,Ridge is required to include in gross income.

Mary establishes a Roth IRA at age 50 and contributes the maximum amount per year to the Roth IRA for 15 years.The account is now worth $199,000,consisting of $75,000 in contributions plus $124,000 in accumulated earnings.How much can Mary withdraw tax-free?

The taxpayer's marginal tax bracket is 25%.Which would the taxpayer prefer?

Once the actual cost method is used,a taxpayer cannot change to the automatic mileage method in a later year.

Which of the following correctly reflects current rules regarding estimated tax payments for individuals?

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

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.

Qualifying job search expenses are deductible even if the taxpayer does not change jobs.