question

One indication of independent contractor (rather than employee) status is when the individual performing the services is paid based on time spent (rather than on tasks performed).

answer

F

question

In some cases it may be appropriate for a taxpayer to report work-related expenses by using both Form 2106 and Schedule C.

answer

T

question

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

answer

F

question

If an individual is subject to the direction or control of another only to the extent of the end result but not as to the means of accomplishment, an employer-employee relationship does not exist.

answer

T

question

The work-related expenses of an independent contractor will be subject to the 2%-of-AGI floor.

answer

F

question

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.

answer

T

question

A taxpayer who maintains an office in the home to conduct his only business will not have nondeductible commuting expense.

answer

T

question

After the automatic mileage rate has been set by the IRS for a year, it cannot later be changed by the IRS.

answer

F

question

In choosing between the actual expense method and the automatic mileage method, a taxpayer should consider the cost of insurance on the automobile.

answer

T

question

A taxpayer who uses the automatic mileage method to compute auto expenses can also deduct the business portion of tolls and parking.

answer

T

question

A taxpayer who uses the automatic mileage method for the business use of an automobile can change to the actual cost method in a later year.

answer

T

question

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

answer

F

question

For tax purposes, "travel" is a broader classification than "transportation."

answer

T

question

Amy lives and works in St. Louis. In the morning she flies to Boston, has a three-hour business meeting, and returns to St. Louis that evening. For tax purposes, Amy was away from home.

answer

F

question

James has a job that compels him to go to many different states during the year. It is possible that James was never away from his tax home during the year.

answer

T

question

A taxpayer who lives and works in Kansas City is sent to Chicago on an eight-day business trip. While in Chicago, taxpayer uses the hotel valet service to have some laundry done. The valet charge is a nondeductible personal travel expense.

answer

F

question

The tax law specifically provides that a taxpayer cannot be temporarily away from home for any period of employment that exceeds one year.

answer

T

question

A taxpayer who lives and works in Tulsa travels to Buffalo for five days. If three days are spent on business and two days are spent on visiting relatives, only 60% of the airfare is deductible.

answer

F

question

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

answer

T

question

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.

answer

T

question

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.

answer

F

question

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.

answer

T

question

In November 2015, Katie incurs unreimbursed moving expenses to accept a new job. Katie cannot deduct any of these expenses when she timely files her 2015 income tax return since she has not yet satisfied the 39-week time test.

answer

F

question

In May 2015, after 11 months on a new job, Ken is fired after he assaults a customer. Ken must include in his gross income for 2015 any deduction for moving expenses he may have claimed on his 2014 tax return.

answer

F

question

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

answer

T

question

Kelly, an unemployed architect, moves from Boston to Phoenix to accept a job as a chef at a restaurant. Kelly's moving expenses are not deductible because her new job is in a different trade or business.

answer

F

question

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

answer

F

question

Qualified moving expenses include the cost of lodging but not meals during the move.

answer

T

question

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

answer

T

question

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.

answer

F

question

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

answer

T

question

Ethan, a bachelor with no immediate family, uses the Pine Shadows Country Club exclusively for his business entertaining. All of Ethan's annual dues for his club membership are deductible.

answer

F

question

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

answer

F

question

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.

answer

T

question

Travis holds rights to a skybox (containing 10 seats) at Memorial Stadium which he uses to entertain key clients. At one sporting event, he took only six clients since three were ill. Even so, Travis may still deduct the appropriate cost of all ten seats.

answer

T

question

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

answer

F

question

A taxpayer who claims the standard deduction will not be able to claim an office in the home deduction

answer

F

question

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.

answer

T

question

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.

answer

F

question

Under the simplified method, the maximum office in the home deduction allowed is the greater of $1,500 or the office square feet × $5.

answer

F

question

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

answer

T

question

Tired of renting, Dr. Smith buys the academic robes she will wear at her college's graduation procession. The cost of this attire does not qualify as a uniform expense

answer

F

question

Frank, a recently retired FBI agent, pays job search expenses to obtain a position with a city police department. Frank's job search expenses do qualify as deductions.

answer

T

question

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.

answer

F

question

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

answer

T

question

Madison is an instructor of fine arts at a local community college. If she spends $600 (not reimbursed) on art supplies for her classes, $250 of this amount can be claimed as a deduction for AGI.

answer

F

question

Both traditional and Roth IRAs possess the advantage of tax-free accumulation of income within the plan.

answer

T

question

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

answer

T

question

For a person who is in the 35% marginal tax bracket, $1,000 of tax-exempt income is equivalent to $1,350 of income that is subject to tax.

answer

F

question

Sarah's employer pays the hospitalization insurance premiums for a policy that covers all employees and retired former employees. After Sarah retires, the hospital insurance premiums paid for her by her employer can be excluded from her gross income.

answer

T

question

Meg's employer carries insurance on its employees that will pay an employee his or her regular salary while the employee is away from work due to illness. The premiums for Meg's coverage were $1,800. Meg was absent from work for two months as a result of a kidney infection. Meg's employer's insurance company paid Meg's regular salary of $8,000 while she was away from work. Meg also collected $2,000 on a wage continuation policy she had purchased. Meg must include $11,800 in her gross income.

answer

F

question

. If an employer pays for the employee's long-term care insurance premiums, the employee can exclude from gross income the premiums but all of the benefits collected must be included in gross income.

answer

F

question

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.

answer

F

question

Carla is a deputy sheriff. Her employer requires that she live in the county where she is employed. Housing is very expensive; so the county agreed to pay her $4,800 per year to cover the higher cost of housing. Carla must include the housing supplement in her gross income.

answer

T

question

. Roger is in the 35% marginal tax bracket. Roger's employer has created a flexible spending account for medical and dental expenses that are not covered by the company's health insurance plan. Roger had his salary reduced by $1,200 during the year for contributions to the flexible spending plan. However, Roger incurred only $1,100 in actual expenses for which he was reimbursed. Under the plan, he must forfeit the $100 unused amount. His after-tax cost of overfunding the plan is $65.

answer

T

question

Mauve Company permits employees to occasionally use the copying machine for personal purposes. The copying machine is located in the office where the higher paid executives work, so they occasionally use the machine. However, the machine is not convenient for use by the lower paid warehouse employees and, thus, they never use the copier. The use of the copy machine may not be excluded from gross income because the benefit is discriminatory.

answer

F

question

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.

answer

F

question

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.

answer

T

question

A U.S. citizen who works in France from February 1, 2015 until January 31, 2016 is eligible for the foreign earned income exclusion in 2015 and 2016.

answer

T

question

Generally, a U.S. citizen is required to include in gross income the salary and wages earned while working in a foreign country even if the foreign country taxes the income.

answer

F

question

Zork Corporation was very profitable and had accumulated excess cash. The company decided to repurchase some of its bonds that had been issued for $1,000,000. Because of an increase in market interest rates, Zork was able to retire the bonds for $900,000. The company is not required to recognize $100,000 of income from the discharge of its indebtedness but must reduce the basis in its assets.

answer

F

question

Only self-employed individuals are required to make estimated tax payments.

answer

F

question

The calculation of FICA and the self-employment tax both involve two components: the Social Security portion and the Medicare portion, each portion of which is imposed on the same base amounts.

answer

F

question

A participant has an adjusted basis of $0 in any nondeductible contributions to a traditional IRA.

answer

F

question

The maximum annual contribution to a Roth IRA for an unmarried taxpayer who is age 35 is the smaller of $5,500 or the individual's compensation for the year.

answer

T

question

If an individual is ineligible to make a deductible contribution to a traditional IRA, nondeductible contributions of any amount can be made to a traditional IRA

answer

F

question

The maximum annual contribution to a Roth IRA for an unmarried taxpayer who is age 35 is the smaller of $5,500 or the individual's compensation for the year.

answer

T

question

Contributions to a Roth IRA can be made up to the due date (excluding extensions) of the taxpayer's income tax return.

answer

T

question

An individual, age 40, who is not subject to the phase-out provision may contribute a nondeductible amount to a Roth IRA up to $5,500 per year in 2015.

answer

T

question

A participant who is at least age 59 1/2 can make a tax-free qualified withdrawal from a Roth IRA after a five-year holding period.

answer

T

question

Distributions from a Roth IRA that are subject to taxation are treated first as from earnings and last as from contributions.

answer

F

question

On February 1, 2015, Tuan withdrew $15,000 from his IRA #1. He deposited the funds back into IRA #1 within 60 days (a"rollover"). Tuan may do one more nontaxable rollover distribution from either IRA #1 or IRA #2 starting in April 2015

answer

F

question

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.

answer

F

question

Aiden performs services for Lucas. Which, if any, of the following factors indicate that Aiden is an employee, rather than an independent contractor? a. Aiden provides his own support services (e.g., work assistants). b. Aiden obtained his training (i.e., job skills) from his father. c. Aiden is paid based on hours worked. d. Aiden makes his services available to others. e. None of these.

answer

C

question

Jordan performs services for Ryan. Which, if any, of the following factors indicate that Jordan is an independent contractor, rather than an employee? a. Ryan sets the work schedule. b. Ryan provides the tools used. c. Jordan files a Form 2106 with his Form 1040. d. Jordan is paid based on tasks performed. e. None of these.

answer

D

question

Which, if any, of the following factors is not a characteristic of independent contractor status? a. Work-related expenses are reported on Form 2106. b. Receipt of a Form 1099 reporting payments received. c. Workplace fringe benefits are not available. d. Services are performed for more than one party. e. None of these.

answer

A

question

A worker may prefer to be treated as an independent contractor (rather than an employee) for which of the following reasons: a. Avoids the cutback adjustment as to business meals. b. All of the self-employment tax is deductible for income tax purposes. c. Work-related expenses are not subject to the 2%-of-AGI floor. d. A Schedule C does not have to be filed. e. None of these.

answer

C

question

A worker may prefer to be classified as an employee (rather than an independent contractor) for which of the following reasons: a. To claim unreimbursed work-related expenses as a deduction for AGI. b. To avoid the self-employment tax. c. To avoid the cutback adjustment on unreimbursed business entertainment expenses. d. To avoid the 2%-of-AGI floor on unreimbursed work-related expenses. e. None of these.

answer

B

question

Corey is the city sales manager for "RIBS," a national fast food franchise. Every working day, Corey drives his car as follows: Miles Home to office 20 Office to RIBS No. 1 15 RIBS No. 1 to No. 2 18 RIBS No. 2 to No. 3 13 RIBS No. 3 to home 30 Corey's deductible mileage is: a. 0 miles. b. 50 miles. c. 66 miles. d. 76 miles. e. None of these.

answer

E

question

Amy works as an auditor for a large major CPA firm. During the months of September through November of each year, she is permanently assigned to the team auditing Garnet Corporation. As a result, every day she drives from her home to Garnet and returns home after work. Mileage is as follows: Miles Home to office 10 Home to Garnet 30 Office to Garnet 35 For these three months, Amy's deductible mileage for each workday is: a. 0. b. 30. c. 35. d. 60. e. None of these.

answer

D

question

Aaron is a self-employed practical nurse who works out of his home. He provides nursing care for disabled persons living in their residences. During the day he drives his car as follows. Miles Aaron's home to patient Louise 12 Patient Louise to patient Carl 4 Patient Carl to patient Betty 6 Patient Betty to Aaron's home 10 Aaron's deductible mileage for each workday is: a. 10 miles. b. 12 miles. c. 20 miles. d. 22 miles. e. 32 miles.

answer

E

question

When using the automatic mileage method, which, if any, of the following expenses also can be claimed? a. Engine tune-up. b. Parking. c. Interest on automobile loan. d. MACRS depreciation. e. None of these.

answer

B

question

In which, if any, of the following situations is the automatic mileage available? a. A limousine to be rented by the owner for special occasions (e.g., weddings, high school proms). b. The auto belongs to taxpayer's mother. c. One of seven cars used to deliver pizzas. d. MACRS statutory percentage method has been claimed on the automobile. e. None of these.

answer

E

question

Under the actual cost method, which, if any, of the following expenses will not be allowed? a. Car registration fees. b. Auto insurance. c. Interest expense on a car loan (taxpayer is an employee). d. Dues to auto clubs. e. All of these will be allowed.

answer

C

question

Dave is the regional manager for a national chain of auto-parts stores and is based in Salt Lake City. When the company opens new stores in Boise, Dave is given the task of supervising their initial operation. For three months, he works weekdays in Boise and returns home on weekends. He spends $350 returning to Salt Lake City but would have spent $410 had he stayed in Boise for the weekend. As to the weekend trips, how much, if any, qualifies as a deduction? a. $0, since the trips are personal and not work related. b. $0, since Dave's tax home has changed from Salt Lake City to Boise. c. $60 d. $350 e. $410

answer

D

question

Allowing for the cutback adjustment (50% reduction for meals and entertainment), which of the following trips, if any, will qualify for the travel expense deduction? a. Dr. Jones, a general dentist, attends a two-day seminar on developing a dental practice. b. Dr. Brown, a surgeon, attends a two-day seminar on financial planning. c. Paul, a romance language high school teacher, spends summer break in France, Portugal, and Spain improving his language skills. d. Myrna went on a two-week vacation in Boston. While there, she visited her employer's home office to have lunch with former co-workers. e. All of these.

answer

A

question

During the year, John went from Milwaukee to Alaska on business. Preceding a five-day business meeting, he spent four days vacationing at the beach. Excluding the vacation costs, his expenses for the trip are: Air fare $3,200 Lodging 900 Meals 800 Entertainment 600 Presuming no reimbursement, deductible expenses are: a. $3,200. b. $3,900. c. $4,800. d. $5,500. e. None of these.

answer

C

question

During the year, Sophie went from Omaha to Lima (Peru) on business. She spent four days on business, two days on travel, and four days on vacation. Disregarding the vacation costs, Sophie's unreimbursed expenses are: Air fare $3,000 Lodging 800 Meals 600 Entertainment 400 Sophie's deductible expenses are: a. $4,300. b. $3,100. c. $2,800. d. $2,500. e. None of these.

answer

B

question

During the year, Walt travels from Seattle to Tokyo (Japan) on business. His time was spent as follows: 2 days travel (one day each way), 2 days business, and 2 days personal. His expenses for the trip were as follows (meals and lodging reflect only the business portion): Air fare $3,000 Lodging 2,000 Meals and entertainment 1,000 Presuming no reimbursement, Walt's deductible expenses are: a. $3,500. b. $4,500. c. $5,500. d. $6,000. e. None of these.

answer

C

question

In terms of meeting the distance test for purposes of deducting moving expenses, which of the following statements is correct? a. The taxpayer's new job location must be at least 50 miles away from the old job. b. The taxpayer's new residence must be at least 50 miles away from the new job. c. The taxpayer's new residence must be at least 50 miles away from the old residence. d. The taxpayer's new job location must be at least 50 miles farther from the old residence than the old residence was to the old job. e. None of these.

answer

D

question

Due to a merger, Allison transfers from Miami to Chicago. Under a new job description, she is reclassified from employee to independent contractor status. Her moving expenses, which are not reimbursed, are as follows: Transportation $1,400 Meals 400 Lodging 500 Cost of moving household goods 4,000 Penalty for breaking lease on Miami apartment 3,000 Allison's deductible moving expense is: a. $0. b. $5,900. c. $6,100. d. $8,900. e. $9,300.

answer

B

question

. Rachel is single and has a college degree in finance. She is employed as a loan officer at a bank; her yearly AGI approximates $50,000. During the year, she enrolled in a weekend MBA program and incurred the following nonreimbursed expenses: $4,100 (tuition), $300 (books), $200 (other school supplies), and $200 (transportation to and from campus). Disregarding the 2%-of-AGI limitation, as to the MBA program, Rachel has a: a. Deduction for and deduction from AGI of $0. b. Deduction for AGI of $4,000 and deduction from AGI of $800. c. Deduction for AGI of $4,000 and deduction from AGI of $700. d. Deduction for AGI of $4,100 and deduction from AGI of $700. e. None of these.

answer

B

question

. The § 222 deduction for tuition and related expenses is available: a. Only if the taxpayer itemizes deductions from AGI. b. To deduct that portion of the tuition in excess of that allowed under the lifetime learning credit. c. To cover the tuition of a son who does not qualify as taxpayer's dependent. d. Only if job related. e. None of these.

answer

E

question

The § 222 deduction for tuition and related expenses is available: a. Regardless of the amount of a taxpayer's MAGI. b. To cover room and board expenses to attend college. c. To a married taxpayer filing a separate return. d. Even if a taxpayer does claim the standard deduction. e. None of these.

answer

D

question

Which, if any, of the following is subject to a cutback adjustment? a. An airline pilot for an executive jet rental company who pays his own travel expenses. b. Meals provided at cost to employees by a cafeteria funded by the employer. c. Fourth of July company picnic for employees. d. A trip to Bermuda awarded to the company's top salesperson. e. None of these.

answer

A

question

Robert entertains several of his key clients on January 1 of the current year. Expenses paid by Robert are as follows: Cab fare $ 60 Cover charge at supper club 200 Dinner at club 800 Tips to waiter 160 Presuming proper substantiation, Robert's deduction is: a. $610. b. $640. c. $740. d. $1,220. e. None of these.

answer

B

question

Ralph made the following business gifts during the year. To Robert (a key client) at Christmas $50 To Angel (Robert's 8-year old daughter) on her birthday 20 To Art (Ralph's secretary) on his birthday ($3 was for gift wrapping) 30 To Paige (Ralph's boss) at Christmas 40 Presuming proper substantiation, Ralph's deduction is: a. $0. b. $53. c. $73. d. $78. e. $98.

answer

B

question

The taxpayer's marginal tax bracket is 25%. Which would the taxpayer prefer? a. $1.00 taxable income rather than $1.25 tax-exempt income. b. $1.00 taxable income rather than $.75 tax-exempt income. c. $1.25 taxable income rather than $1.00 tax-exempt income. d. $1.40 taxable income rather than $1.00 tax-exempt income. e. None of these.

answer

D

question

The exclusion for health insurance premiums paid by the employer applies to: a. Only current employees and their spouses. b. Only current employees and their spouses and dependents. c. Only current employees and their disabled spouses. d. Present employees, retired former employees, and their spouses and dependents. e. None of these.

answer

D

question

100. 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: a. $0. b. $6,000. c. $8,000. d. $14,000. e. $20,000.

answer

E

question

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: a. Decrease by the same amount for all employees. b. Increase more for the lower paid employees (10% and 15% marginal tax bracket). c. Increase more for the higher income (35% marginal tax bracket) employees. d. Increase by the same amount for all employees. e. None of these.

answer

C

question

The plant union is negotiating with the Eagle Company, which is on the verge of bankruptcy. Eagle has offered to pay for the employees' hospitalization insurance in exchange for a wage reduction. The employees each currently pay premiums of $4,000 a year for their insurance. Which of the following is correct: a. If an employee's wages are reduced by $5,000 and the employee is in the 28% marginal tax bracket, the employee would benefit from the offer. b. If an employee's wages are reduced by $4,000 and the employee is in the 15% marginal tax bracket, the employee would benefit from the offer. c. If an employee's wages are reduced by $6,000 and the employee is in the 35% marginal tax bracket, the employee would benefit from the offer. d. a., b., and c. e. None of these.

answer

D

question

James, a cash basis taxpayer, received the following compensation and fringe benefits in the current year: Salary $66,000 Disability income protection premiums 3,000 Long-term care insurance premiums 4,000 His actual salary was $72,000. He received only $66,000 because his salary was garnished and the employer paid $6,000 on James's credit card debt he owed. The wage continuation insurance is available to all employees and pays the employee three-fourths of the regular salary if the employee is sick or disabled. The long-term care insurance is available to all employees and pays $150 per day towards a nursing home or similar facility. What is James's gross income from the above? a. $66,000. b. $72,000. c. $73,000. d. $75,000. e. None of these.

answer

B

question

The First Chance Casino has gambling facilities, a bar, a restaurant, and a hotel. All employees are allowed to obtain food from the restaurant at no charge during working hours. In the case of the employees who operate the gambling facilities, bar, and restaurant, 60% of all of Casino's employees, the meals are provided for the convenience of the Casino. However, the hotel workers, demanded equal treatment and therefore were also allowed to eat in the restaurant at no charge while they are at work. Which of the following is correct? a. All the employees are required to include the value of the meals in their gross income. b. Only the restaurant employees may exclude the value of their meals from gross income. c. Only the employees who work in gambling, the bar, and the restaurant may exclude the meals from gross income. d. All of the employees may exclude the value of the meals from gross income. e. None of these.

answer

D

question

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.

answer

B

question

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. a. $0. b. $800 per month. c. $2,100 per month. d. $1,890 ($2,100 × .90). e. None of these.

answer

A

question

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. Adam must include the reimbursement in his gross income. b. Adam can exclude the reimbursement from his gross income since the meals are provided for the convenience of the employer. c. Adam can exclude the reimbursement from his gross income because he eats the meals on the employer's business premises (the truck). d. Adam may exclude from his gross income the difference between what he paid for the meals and what it would have cost him to eat at home. e. None of these.

answer

A

question

Under the Swan Company's cafeteria plan, all full-time employees are allowed to select any combination of the benefits below, but the total received by the employee cannot exceed $8,000 a year. I. Group medical and hospitalization insurance for the employee, $3,600 a year. II. Group medical and hospitalization insurance for the employee's spouse and children, $1,200 a year. III. Child-care payments, actual cost but not more than $4,800 a year. IV. Cash required to bring the total of benefits and cash to $8,000. Which of the following statements is true? a. Sam, a full-time employee, selects choices II and III and $2,000 cash. His gross income must include the $2,000. b. Paul, a full-time employee, elects to receive $8,000 cash because his wife's employer provided these same insurance benefits for him. Paul is not required to include the $8,000 in gross income. c. Sue, a full-time employee, elects to receive choices I, II and $3,200 for III. Sue is required to include $3,200 in gross income. d. All of these. e. None of these.

answer

A

question

Heather is a full-time employee of the Drake Company and participates in the company's flexible spending plan that is available to all employees. Which of the following is correct? a. Heather reduced her salary by $1,200, actually spent $1,500, and received only $1,200 as reimbursement for her medical expenses. Heather's gross income will be reduced by $1,500. b. Heather reduced her salary by $1,200, and received only $900 as reimbursement for her actual medical expenses. She is not refunded the $300 remaining balance, but her gross income is reduced by $1,200. c. Heather reduced her salary by $1,200, and received only $800 as reimbursement for her medical expenses. She is not refunded the $400. Her gross income is reduced by $800. d. Heather reduced her salary by $1,200, and received only $900 as reimbursement for her medical expenses. She forfeits the $300. Her gross income is reduced by $300. e. None of these.

answer

B

question

Employees of the Valley Country Club are allowed to use the golf course without charge before and after working hours on Mondays, when the number of players on the course is at its lowest. Tom, an employee of the country club played 40 rounds of golf during the year at no charge when the non-employee charge was $20 per round. a. Tom must include $800 in gross income. b. Tom is not required to include anything in gross income because it is a de minimis fringe benefit. c. Tom is not required to include the $800 in gross income because the use of the course was a gift. d. Tom is not required to include anything in gross income because this is a "no-additional-cost service" fringe benefit. e. None of these.

answer

D

question

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? a. The non-management employees who buy automobiles at a discount are not required to recognize income from the purchase. b. None of the employees who take advantage of the fringe benefits described above are required to recognize income. c. Employees of Royal are required to recognize as gross income 18% (20% - 2%) of the cost of the automobile purchased. d. All of these. e. None of these.

answer

A

question

Peggy is an executive for the Tan Furniture Manufacturing Company. Peggy purchased furniture from the company for $9,500, the price Tan ordinarily would charge a wholesaler for the same items. The retail price of the furniture was $12,500, and Tan's cost was $9,000. The company also paid for Peggy's parking space in a garage near the office. The parking fee was $600 for the year. All employees are allowed to buy furniture at a discounted price comparable to that charged to Peggy. However, the company does not pay other employees' parking fees. Peggy's gross income from the above is: a. $0. b. $600. c. $3,500. d. $4,100. e. None of these.

answer

A

question

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. a. Ed must include $150 in his gross income. b. Ed may exclude the cost of the copies as a no-additional cost fringe benefit. c. Ed may exclude the cost of the copies only if the organization is a client of Mauve. d. Ed may exclude the cost of the copies as a de minimis fringe benefit. e. None of these.

answer

D

question

The Perfection Tax Service gives employees $12.50 as "supper money" when they are required to work overtime, approximately 25 days each year. The supper money received: a. Must be included in the employee's gross income. b. Must be included in the employee's gross income if the employee does not spend it for supper. c. May be excluded from the employee's gross income as a "no-additional cost" fringe benefit. d. May be excluded from the employee's gross income as a de minimis fringe benefit. e. None of these.

answer

D

question

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.

answer

B

question

. Evaluate the following statements: I. De minimis fringe benefits are those that are so immaterial that accounting for them is impractical. II. De minimis fringe benefits are subject to strict anti-discrimination requirements. III. Generally, a fringe benefit of less than $50 is considered de minimis and can be excluded from gross income. a. Only I is true. b. Only III is true. c. Only I and III are true. d. I, II, and III are true. e. None of these.

answer

A

question

Kristen's employer owns its building and provides parking space for its employees. The value of the free parking is $150 per month. Karen's employer does not have parking facilities, but reimburses its employee for the cost of parking in a nearby garage, up to $150 per month. a. Kristen and Karen must recognize gross income from the parking services. b. Kristen can exclude the employer provided parking from gross income, but Karen must include her reimbursement in gross income. c. Kristen must include the value of the employer provided parking from her gross income, but Karen can exclude her reimbursement from gross income. d. Neither Kristen nor Karen is required to include the cost of parking in gross income. e. None of these.

answer

A

question

A company has a medical reimbursement plan for officers that covers all costs that the insurer will not pay. However, for all employees who are not officers, the medical reimbursement plan applies only after the employee has paid $1,000 from his or her own funds. An officer incurred $1,500 in medical expenses and was reimbursed for that amount. An hourly worker also incurred $1,500 in medical expense and was reimbursed $500. a. Both employees must include all benefits received in gross income. b. The officer must include $500 in gross income. c. The officer must include $1,500 in gross income. d. The hourly employee must include $1,000 in gross income. e. None of these.

answer

C

question

. Louise works in a foreign branch of her employer's business. She earned $5,000 per month throughout the relevant period. Which of the following is correct: a. If Louise worked in the foreign branch from May 1, 2014 until October 31, 2015, she may exclude $40,000 from gross income in 2014 and exclude $50,000 in 2015. b. If Louise worked in the foreign branch from May 1, 2014 until October 31, 2015, she cannot exclude anything from gross income because she was not present in the country for 330 days in either year. c. If Louise began work in the foreign country on May 1, 2014, she must work through November 30, 2015 in order to exclude $55,000 from gross income in 2015 but none in 2014. d. Louise will not be allowed to exclude any foreign earned income because she made less than $100,800. e. None of these.

answer

A

question

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? a. The taxpayer cannot exclude any of the income because she was not present in the foreign country more than 330 days in either 2014 or 2015. b. The taxpayer can exclude a portion of the salary from U.S. gross income in 2014 and 2015, and all of the dividend income. c. The taxpayer can exclude from U.S. gross income $60,000 salary in 2014, but in 2015 the taxpayer will exceed the twelve month limitation and, therefore, all of the 2015 compensation must be included in gross income. All of the dividends must be included in 2014 gross income. d. The taxpayer must include the dividend income of $5,000 in 2014 gross income, but the taxpayer can exclude a portion of the compensation income from U.S. gross income in 2014 and 2015. e. None of these.

answer

D

question

. 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: a. $0. b. $10,000. c. $13,000. d. $14,000. e. None of the above.

answer

B

question

Which of the following correctly reflects current rules regarding estimated tax payments for individuals? a. Employees are not subject to the estimated tax payment provisions. b. Any penalty imposed for underpayment is deductible for income tax purposes. c. Married taxpayers may not make joint estimated tax payments unless they file a joint income tax return. d. No quarterly payments are required if the taxpayer's estimated tax is under $1,000. e. None of the above.

answer

D

question

Pat generated self-employment income in 2015 of $76,000. The self-employment tax is: a. $0. b. $5,369.23. c. $10,738.46. d. $11,628.00. e. None of the above.

answer

C

question

The ceiling amounts and percentages for 2015 for the two portions of the self-employment tax are: Social Security portion Medicare portion a. $118,500; 12.4% Unlimited; 2.9% b. $118,500; 15.3% Unlimited; 2.9% c. $117,000; 12.4% Unlimited; 2.9% d. $117,000; 2.9% Unlimited; 13.3% e. None of the above.

answer

A

question

Merrill is a participant in a SIMPLE § 401(k) plan, and he elects to contribute 4% of his $40,000 compensation to the account, while his employer contributes 3%. What amount will vest immediately, if any? a. $0 b. $1,200 c. $1,600 d. $2,800 e. None of above

answer

D

question

Susan is a self-employed accountant with a qualified defined contribution plan (a Keogh plan). She has the following income items for the year: Earned income from self-employment $50,000 Dividend income 8,000 Interest income 2,000 Net short-term capital gain 12,000 Adjusted gross income $72,000 What is the maximum amount Susan can deduct as a contribution to her retirement plan in 2015, assuming the self-employment tax rate is 15.3%? a. $9,235. b. $12,000. c. $46,000. d. $46,468. e. None of the above.

answer

D

question

Joyce, age 40, and Sam, age 42, who have been married for seven years, are both active participants in qualified retirement plans. Their total AGI for 2015 is $120,000. Each is employed and earns a salary of $65,000. What are their combined deductible contributions to traditional IRAs? a. $0 b. $3,000 c. $4,000 d. $8,000 e. None of the above

answer

A

question

Dana, age 31 and unmarried, is an active participant in a qualified retirement plan. Her AGI is $120,000. What amount, if any, may Dana contribute to a Roth IRA in 2015? a. $0 b. $3,225 c. $4,033 d. $5,500 e. None of the above

answer

C

question

. Sammy, age 31, is unmarried and is not an active participant in a qualified retirement plan. His modified AGI is $55,000 in 2015. The maximum amount that Sammy can deduct for a contribution to a traditional IRA is: a. $2,800. b. $3,500. c. $5,000. d. $5,500. e. None of the above.

answer

D

question

Frank established a Roth IRA at age 25 and contributed a total of $131,244 to it over 38 years. The account is now worth $376,000. How much of these funds can Frank withdraw tax-free? a. $0 b. $131,244 c. $244,756 d. $376,000 e. None of the above

answer

D

question

. 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? a. $0 b. $75,000 c. $124,000 d. $199,000 e. None of the above

answer

D

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