Mikey is a self-employed computer game software designer. He takes a week-long trip to Maui, primarily for business. He takes two personal days at the beach. How should he treat the expenses related to this trip?
Choose one answer. a. None of the expenses are deductible since there was an element of personal enjoyment in the trip.
b. 100% of the trip should be deducted as a business expense since the trip was primarily for business.
c. 50% of the trip should be deducted as a business expense.
d. The cost of all of the airfare and the expenses related to the business days should be deducted, while the expenses related to the personal days are not deductible.
2. The cost of safety glasses is deductible by an employee who must wear them on the job.
3. The expense of travel as a from of education is not deductible.
4. A business gift with a value of $35 presented to a client and his non-client spouse is fully deductible by the donor.
5. The standard mileage rate for automobiles for the full year of 2009 is 50.5 cents per mile.
6. For an expense to qualify as a travel expense, the taxpayer must be away from home for a t least 24 hours.
7. The home office deduction is an easy way for a taxpayer to show a loss on his or her tax return.
8. The cost of a subscription to the New England Journal of Medicine is a deductible expense for a hospital intern.
9. The cost of a blue wool suit for an accountant is a deductible expense.
10. A gift to a foreman by a worker is considered business related and therefore subject to the $25 limit.
MULTIPLE CHOICE
11. During 2009, Harry, a self-employed accountant, travels from Kansas City to Miami for a one-week business trip. While in Miami, Harry decides to stay for an additional 5 days of vacation. Harry pays $600 for airfare, $200 for meals, and $500 for lodging while on business. The cost of meals and lodging while on vacation was $300 and $500, respectively. How much may Harry deduct as travel expenses for the trip?
a. $600
b. $1200
c. $1260
d. $2100
e. none of the above
12. During the 2009 holiday season, Bob, a barber, gave business gifts to 34 customers. The values of the gifts, which were not of a promotional nature, were as follows:
8 at $10 each
8 at $25 each
8 at $50 each
10 at $100 each
For 2009, what is the amount of Bob's business gift deduction?
a. $0
b. $280
c. $730
d. $850
e. none of the above
13. If a per diem method is not used, which of the following items is not required as substantiation for the deduction of travel expense?
a. amount spent
b. destination
c. business reason for the trip
d. departure and return dates
e. all of the above must be substantiated
14. Nancy owns a small dress store. During 2009, Nancy gives business gifts having the indicated cost to the following individuals:
Mrs. Johns (a customer) $37 plus $3 shipping
Mr. Johns (non-client husband of Mrs. Johns) $10
Ms. Brown (a customer) $22
What is the amount of Nancy's deduction for business gifts?
a. $0
b. $50
c. $53
d. $62
e. none of the above
15. Richard operates a hair styling boutique out of his home. 300 of the 1,200 square feet of floor space are allocated to the boutique. Other information is as follows:
Gross income from the boutique $10,000
Supplies for the boutique $2000
Depreciation on total residence $12000
Utilities for total residence $6000
What amount of income or loss from the boutique should Richard show on his return?
a. $10000 loss
b. $0 income or loss
c. $3500 income
d. $5000 income
e. none of the above
16. Peter operates a dental office in his home. The office occupies 250 square feet of his residence, which is a total of 1500 square feet. During 2009, Peter pays rent for his home of $12000, utilities of $4800, and maintenance expenses of $1200. What amount of the total expenses should be allocated to the home office?
a. $0
b. $2000
c. $2500
d. $3000
e. none of the above
17. April and Wilson are married and file a joint tax return. Wilson is a police officer, and in the current tax year he spends $375 on uniforms and $150 for dry cleaning the uniforms. April is in the National Guard and military regulations restrict her form waring her uniforms when she is off duty. The cost of her uniforms for the year was $225 and the cost of dry cleaning them amounted to $75. April was grated a uniform allowance of $200 for the year. She also purchased a pair of standard black shoes to war while on duty that cost $45. How much may they deduct of Schedule A for special clothing and uniforms (before applying the 2% of adjusted gross income limitation)?
a. $525
b. $625
c. $670
d. $825
e. none of the above
18. Which of the following employees may deduct the cost of a uniform?
a. a sock broker required by her employer to wear a business suit
b. a construction worker required by her employer to wear blue jeans
c. a washer repair woman who must wear overalls while on the job
d. a police officer who must wear a uniform while on duty
e. a delivery person who must wear khaki-colored clothes on the job
19. An accountable expense reimbursement plan:
a. requires the employee only to substantiate expenses with receipts
b. does not require the employee to return any excess reimbursement
c. requires the employee to report business expenses as itemized deductions
d. requires the employee to substantiate expenses with receipts and to return any excess reimbursement
20. Chose the correct answer.
a. education expenses are deductible as a miscellaneous itemized deduction even if the education qualifies the taxpayer for a new trade or business
b. expenses required for education to maintain skills for the taxpayers current job are no deductible
c. the cost of a CPA review course is deductible as a miscellaneous itemized deduction
d. expenses for travel as a form of education are not deductible.
21. Jean's employer has an accountable plan for reimbursing employee expenses. jean is reimbursed for $1500 of business travel and $500 for various business subscriptions and professional dues. The $2000 reimbursement should be treated as follows:
a. $2000 of income to Jean should be reported
b. Income to Jean and a corresponding miscellaneous deduction for Jean, subject to the 2% for AGI floor
c. No taxable income should be reported to Jean
d. $500 of income should be reported to Jean
22. Martin has a home office for his business as an agent for rock-and-roll bands The business shows a loss of $2000 before home office expenses. How should the home office expenses be treated?
a. because of the business loss, home office expenses can not be deducted and are lost forever
b. because of the business loss, home office expenses can not be deducted in the current year but can be carried forward to the next year.
c. the home office expenses increase the business loss in the year they are incurred and are fully deductible in that year
d. the home office expenses increase the business loss in the year they are incurred and are 50% deductible in that year.
23. In the current year, Johnice started a profitable bookkeeping business as a sole proprietor. Johnice made $38,000 in her first year of operation. What two forms must Johnice file for her business?
a. schedules a and c
b. schedule d and e
c. schedule se and c
d. schedules b and c
e. none of the above
24. Which of the following is not deductible as a moving expense?
a. the cost of moving household goods.
b. lodging for household members during the move.
c. the cost of a pre-move house-hunting trip.
d. travel expenses during the move.
e. all of the above are deductible as moving expenses.
25. Which of the following factors are considered by the IRS in evaluating whether an activity is classified a s a business or a hobby?
a. The expertise of the taxpayer.
b. the time and effort expended by the taxpayer
c. financial status of the taxpayer.
d. income and loss history from the activity
e. all of the above.
26. In determining whether an activity should be classified as a hobby, the tax law provides a rebuttable presumption with regard to the profits or losses of an activity. Which of the following statements describes the profit/loss test which must be satisfied in order to meet the presumption that the activity is not a hobby?
a. the activity shows a profit for 3 of the 5 previous years.
b. the activity shows a loss for 3 of the 5 previous years
c. the activity shows a profit for 3 of the 7 previous years.
d. the activity shows a loss for 3 of the 7 previous years.
e. none of the above.
27. Charles, a corporate executive, incurred business related, unreimbursed expenses in 2009 as follows:
Entertainment $900
Transportation 700
Education 400
Assuming that charles itemized his deductions, how much of these expenses should he deduct on his 2009 schedule A (before the 2% of adjusted gross income limitation)?
a. 700
b. 1100
c. 1550
d. 2000
e. none of the above
28. Barry is a self-employed attorney who travels to New York on a business trip during 2009. Barry's expenses were as follows:
Airfare $560
Taxis 40
Meals 100
Lodging 350
How much may Barry deduct as travel expenses for the trip?
a. 0
b. 950
c. 1000
d. 1050
e. none of the above
29. To fie a Schedule C-EZ, the taxpayer must:
a. have gross receipts of $25000 or less form the business
b. have business expenses of 5000 or less
c. have inventory of less than 2000 during the year
d. have no more than 2 businesses
e. have no more than 5 employees during the year.
30. To be deductible as the cost of special work clothing or uniforms:
a. the clothing must not be suitable for everyday use and must be required as a condition of employment
b. the clothing must be required as a condition of employment,but can also be suitable for everyday use
c. the clothing need not be required as a condition of employment, but must not be suitable for everyday use
d. only the cost of the clothing is included; upkeep is not deductible
31. Gary is a self-employed accountant who pays 2000 for business meals. How much of a deduction can he claim for the meals and where should the deduction be claimed?
a. 50% misc itemized deduction
b. 50% schedule C deduction
c. 100% miscellaneous itemized deduction
d. 100% schedule C deduction.
32. What income tax form does a self-employed sole proprietor usually use to report income and expense form business?
a. schedule c
b. schedule a misc itemized deductions
c. schedule b
d. form 2106 employee business expenses
e. none of the above
33. What income tax form does an employee use to report expenses that are not reimbursed by an employer under an accountable plan?
a. form 2106 employee business expenses
b. no form the expenses are not deductible to the employee
c. schedule d
d. schedule r
e. schedule c
34. Kendra is a self-employed taxpayer working exclusively from her home office. Before the home office deduction, Kendra has 5000 of net income. Her allocable home expenses are 10000 in total. How are the home office expenses treated on her current year tax return?
a. only 5000 home office expenses may be deducted resulting in net business income of 0. the extra 5000 of home office expenses may be carried forward and deducted in a future year against home office income
b. only 3000 a year of the home office expenses may be deducted
c. all home office expenses may be deducted resulting in a business loss of 5000
d. only 5000 of home office expenses may be deducted, resulting in a net business income of 0. none of the extra 5000 of home office expenses may be carried forward or deducted.
35. Mikey is a self-employed computer game software designer. He takes a week-long trip to Maui, primarily for business. He takes two personal days at the beach. How should he treat the expenses related to this trip?
a. none of the expenses are deductible since there was an element of personal enjoyment in the trip
b. 100% of the trip should be deducted as a business expense since the trip was primarily for business
c. 50% of the trip should be deducted as a business expense.
d. the cost of all of the airfare and the expenses related to the business days should be deducted, while the expenses related to the personal days are not deductible.