Question

1.         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                    8

RIBS No. 2 to No. 3                    3

RIBS No. 3 to office                  10

Office to home                           20

Corey’s deductible daily mileage is:

a.         0 miles.

b.         36 miles.

c.         46 miles.

d.         56 miles.

e.         76 miles.

2.         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 financial planning.

b.         Dr. Brown, an undergraduate pre-med student, attends a two-day seminar on developing a medical practice.

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.         Mary, a CPA, attends a three-day seminar on state income taxation.

3.         Tax advantages of being self-employed (rather than being an employee) include:

a.         The self-employment tax is always lower than the Social Security tax.

b.         The overall limitation (50%) on meals does not apply.

c.         An office in the home deduction from AGI is available without having to meet the “convenience of the employer” test.

d.         Job-related expenses are deductions for AGI.

e.         Both (c) and (d) are advantages.

4.         When using the automatic mileage method, which of the following expenses, if any, also can be claimed?

a. Engine tune-up.

b. Parking.

c. Interest on automobile loan.

d. MACRS depreciation.

e. None of these.

5.         Which, if any, of the following is subject to a 50% cutback adjustment for the cost of meals in 2019?

a.         An airline pilot for an executive jet rental company who pays his own travel expenses while away from home on flights she pilots.

b.         Meals provided at cost to employees by a cafeteria funded by the employer/taxpayer.

c.         A Fourth of July company picnic for employees of the employer/taxpayer.

d.         A vacation trip to Bermuda awarded to the employer/taxpayer’s top salesperson, where the cost (including meals) is treated as a taxable bonus to the employee.

e.         None of these is subject to the 50% cutback.

Answer 1

1. Corey's deductible daily mileage = 15 + 8 + 3 + 10 = 36 miles

Explanation : Commuting to and from work is considered as personal expense, so its not tax - deductible.

2. Answer : (e)

Explanation : CPA attending a three day seminar on state income taxation is businees travel and business travel expenses are tax - deductible.

3. Answer : (d)

Explanation : The overall limitation (50%) on meals applies to self employed taxpayes also. An office in the home deduction is available from AGI to self - employed taxpayers but has to meet the "convenience of the employer" test. Self - employed taxayers self - employent tax is double of what an employee pays. Self - employed taxpayers Job-related expenses are reported on Schedule C and thus are deductions for AGI.

4. Answer: (b)

Explanation : Parking expenses can also be claimed using the automatic mileage method. The other three expenses can be claimed only when using the actual costs method.