Assignment
1. Which of the following is not a factor considered in determining whether an activity is a business or a hobby?
a. Locating the activity in the taxpayer's home
b. Relative amount of pleasure derived from the activity
c. Time and effort devoted to the activity
d. Extent of dependence on the activity for financial support
e. All of the above are factors considered in determining whether an activity is a business or a hobby
2. When using the actual expense method, deductible car and truck expenses include all of the following except:
a. depreciation.
b. garage rent.
c. license tag fees.
d. parking tickets.
e. all of the above are included when using the actual expense method.
3. Expenses eligible for deduction by employees in connection with employment do not include which of the following?
a. Parking fees and tolls in conjunction with running errands for the employer
b. Local transportation to a client's office
c. Airfare associated with a domestic business trip where 40% of the time was spent conducting business
d. Union dues
e. All of the above are deductible employee-related expenses
4. Which of the following miscellaneous itemized deductions is not subject to the 2% AGI floor?
a. Impairment-related work expenses
b. Safety equipment used on the job
c. Job-hunting expenses
d. Tax preparation fees
e. All of the above are itemized deductions subject to the 2% AGI floor
5. Which of the following statements is false regarding the hobby loss rules?
a. The deduction for expenses related to hobby activities cannot exceed hobby income.
b. Hobby income is included in gross income and hobby-related expenses (other than those deductible elsewhere on the tax return) are miscellaneous deductions subject to the 2% AGI floor. c. Depreciation is the last expense taxpayers deduct against hobby income.
d. Hobby deductions in excess of hobby income are carried over to offset hobby income in future tax years.
e. All of the above statements are true (there are no false statements).
6. Fill-in-the-Form: Prepare Form 2106, Employee Business Expenses, and the Job Expenses and Certain Miscellaneous Deductions section on Schedule A, Itemized Deductions, using the information provided.
Your instructor will provide a blank Schedule A and Form 2106.
Richard (SSN 158-75-9466) and Jane Lamont, married with two dependent children, file a joint return. Richard is employed as a sales representative. Jane works as a consultant. The Lamonts have an AGI of $134,000 and provide you with the following additional information. The Lamonts paid the following items:
Safe deposit box rental $30 Tax return preparation 175 Investments publications 36 Richard's unreimbursed work-related expenses:
Meals and entertainment 500 Parking and tolls 48 Travel while away on two-day trip 314 Other business expenses 50 Richard's automobile information:
Total miles driven during the year 30,000 Total miles driven for business 17,750 Daily commuting mileage 5 Total commuting mileage 1,250 Placed in service 05/01/13
The Lamonts elect to use the standard mileage rate to deduct their automobile expenses. They have written documentation to support the deduction for the business use of the automobile. The Lamonts do not have an employer-provided automobile. Jane has her own automobile that she uses for personal purposes.