final exam score:
final exam status:
93%
Question 1
Correct
Which of the following is not a statutory employee?
A full-time life insurance sales agent whose principal activity is selling life insurance for one company
A commission driver who delivers laundry
(You Answered) (Correct Answer) A real estate agent
A home worker performing work on materials furnished by the employer
All of the above are statutory employees.
Question 2
Correct
Roland Burns, a self-employed taxpayer, pays $250 for two theater tickets which he intends to use by taking a client to the theater after a business dinner. At the last minute, Roland is unable to go and he gives both tickets to his client. Which of the following statements is correct with regard to the tickets?
Roland can deduct $50 as a business gift.
Roland can deduct $25 as a business gift.
Roland can deduct $125 as an entertainment expense.
(You Answered) (Correct Answer) Roland has the option of deducting $25 as a business gift or $125 as an entertainment expense.
Question 3
Correct
Herbert Weiss opened an antique store. He showed the following profit and loss for the last seven years: 2004, ($550); 2005, ($2,560); 2006, $1,500; 2007, $775; 2008, $2,550; 2009, ($3,600); 2010, ($2,755). Since the antique store did not make a profit in 2009 or 2010, for purposes of completing his 2010 tax return, it is presumed that the antique store is a hobby.
True
(You Answered) (Correct Answer) False
Question 4
Correct
Delores Shipman, an architect employed in Chicago, decided to take a one-week course on the latest building techniques. She went to San Francisco, devoted one week to the course, and then spent two weeks visiting old friends and sightseeing. After that, Delores returned to Chicago. None of Delores’s expenses were reimbursed by her employer. What travel expenses can Delores deduct, assuming that she can itemize and has other miscellaneous itemized deductions in excess of 2 percent of her adjusted gross income?
Transportation expenses to and from San Francisco
(You Answered) (Correct Answer) Continuing education expenses and meals and lodging during the one week spent on education
Meals and lodging during the two weeks visiting old friends
All of the above
Question 5
Correct
Three New York attorneys, who are friends, meet once a month socially for lunch. In an attempt to qualify the lunch as a business meeting, they make it a point to discuss their cases at the lunches. Each attorney takes turns in picking up the lunch bill. Tom Brown, one of the attorneys, spent a total of $1,000 during the year picking up four lunches. How much of the $1,000 can Tom deduct?
$500
$1,000
$250
(You Answered) (Correct Answer) $0
Question 6
Correct
Theo Dowd is an outside salesman who travels constantly. Theo’s sales territory spans seven states that comprise the company’s Midwest region. Although Theo’s company headquarters are in Chicago, Illinois, he does not conduct any business there. Theo’s work assignments are temporary and he has no way of knowing the location of his future work assignments. Theo has a room in his brother’s house located in Hammond, Indiana, where he stays for several weekends a year. He does not pay his brother rent for the room and he does not have customers in the area. Theo incurs a sizable amount of lodging and meal expenses, which are not reimbursed by his employer. Where is Theo’s tax home?
Chicago, Illinois
Hammond, Indiana
Washington, D.C.
(You Answered) (Correct Answer) Theo does not have a tax home.
Question 7
Correct
Shawn Simmons maintains his family home in Philadelphia, Pennsylvania. His main place of employment is New York City. Shawn flies to New York to conduct his business. During the year, Shawn and his wife flew to Chicago for a business convention relating to Shawn’s business. Shawn’s wife’s only business function was entertaining customers, and none of his expenses were reimbursed by his company. Assuming that Shawn and his wife can itemize and meet the 2 percent of adjusted gross income floor on the aggregate amount of miscellaneous itemized deductions, the following expenses can be deducted:
Shawn’s travel to and from New York City
(You Answered) (Correct Answer) Shawn’s travel to and from Chicago
Shawn and his wife’s travel to and from Chicago
All of the above
Question 8
Correct
Benjamin Thompson, who lives in Miami, Florida, traveled to Paris, France, for business. He left Miami on Sunday. The meeting was held on Monday and Tuesday. Benjamin spent Wednesday and Thursday sightseeing before flying home Friday. How many of the six days that Benjamin was out of town count as business days?
2
3
(You Answered) (Correct Answer) 4
6
Question 9
Correct
Barbara Watkins flew from New York City to Munich, Germany, on business. She spent 12 days on business and 3 days sightseeing. Barbara then flew back to New York. Barbara spent one day flying in each direction. What travel expenses can Barbara deduct?
The entire trip to Munich is deductible. However, meals are subject to the 50 percent deduction limitation.
Barbara can deduct the round-trip airfare and 12 days of meals (subject to the 50 percent deduction limitation), lodging, and other business related expenses.
(You Answered) (Correct Answer) Barbara can deduct the round-trip airfare and 14 days (12 days of business and two days flying) of meals (subject to the 50 percent deduction limitation), lodging, and other business-related expenses.
None of the above.
Question 10
Correct
Michele Sherman is a fashion designer who lives and works in Nashville, Tennessee. Michelle takes a temporary job in Memphis that was scheduled to last 10 months. After 7 months, Michelle is informed that the assignment will actually last 13 months. Michelle returns to Nashville after she completes the 13-month assignment. Which of the following statements is true regarding Michelle’s travel expenses while living in Nashville?
(You Answered) (Correct Answer) Since the assignment was originally scheduled to last less than a year, Michelle will be able to deduct her travel expenses until the end of the seventh month when she learned that her assignment would last more than a year.
Since the assignment was originally scheduled to last less than a year, Michelle will be able to deduct her travel expenses for the first 12 months.
Since the assignment actually lasted for more than a year, Michelle cannot deduct any of her travel expenses.
Since the assignment was originally scheduled to last less than a year, Michelle will be able to deduct her travel expenses for the original 10 months the assignment was scheduled to last.
Question 11
Correct
John Smith is employed as a sales manager by ABC Manufacturing Company. John incurred the following unreimbursed expenses for days away from home on business for the year: \r\rBusiness meals $1,000\rLodging 1,600\rTransportation 1,000\rEntertainment 2,200\r\rJohn is able to itemize on Schedule A. His adjusted gross income, without regard to the above expenses, is $50,000. If John does not have any other miscellaneous itemized deductions, what is the amount of unreimbursed business expenses that will increase John’s itemized deductions?
$4,200
(You Answered) (Correct Answer) $3,200
$5,300
$4,300
Question 12
Correct
Howard Stein, DEF Corporation president and controlling shareholder, takes a 10-day trip to Europe. Howard spends six days conducting business and four days vacationing. His costs for the trip include $1,000 for airfare, $170 a night for the hotel (five of which were business-related), and $50 a day for meals (six of which were for business). Which of the following amounts of travel expenses is deductible?
$2,150
(You Answered) (Correct Answer) $1,600
$2,000
$1,750
Question 13
Correct
Ann Carter, a self-employed travel agent, traveled by ocean liner from Boston to Belfast, Ireland, for business in June. Ann’s expenses for the 10-day cruise were $7,500. Meals and entertainment costs were not separately stated. Assuming that the highest applicable federal per diem travel rate is $258, how much can Ann deduct of her travel on the cruise ship?
(You Answered) (Correct Answer) $5,160
$3,750
$7,500
$2,580
Question 14
Correct
A self-employed taxpayer attends a sporting event with a client. The tickets cost $200. What amount can the taxpayer deduct for the tickets?
$25
$50
(You Answered) (Correct Answer) $100
$200
Question 15
Correct
Ted Knight, an employee of an architectural firm, makes the following gifts that were not reimbursed by his employer: \r\rGift to Fred Sanders (a client of Ted Knight) $20\rGift to Fred Sanders's wife (not a client of Ted Knight) 15\rGift to Arnold Down (a client of Ted Knight) 30\r \rGift-wrapping for the gifts to Fred and Arnold ($5.00 per gift) 10\r\rAssuming that Ted can itemize and has other miscellaneous itemized deductions in excess of 2 percent of his adjusted gross income, what amount can Ted deduct as business gifts?
$50
$55
(You Answered) (Correct Answer) $60
$75
Question 16
Correct
Which of the following entertainment expenses is deductible as associated entertainment?
Entertainment where business is discussed before the entertainment
Entertainment where business is discussed after the entertainment
Entertainment where business is discussed during the entertainment
(You Answered) (Correct Answer) All of the above are considered associated entertainment.
Question 17
Correct
Henry Sheffield, a manufacturer, owns and uses during the tax year a hunting lodge for both personal and business purposes. The operating expenses for the lodge, including depreciation, totaled $1,200 during the tax year. Henry used the lodge 75 percent for business (40 percent for directly related entertainment and 35 percent for associated entertainment). In addition to these expenses, Henry incurred the following expenses in connection with entertaining customers at the lodge:\r \rFood and beverages in entertainment that was directly related to the active conduct of his business\r $1,700 \rFood and beverages in entertainment that was associated with the active conduct of his business\r 2,600 \rPersonal and family consumption of food and beverages\r 1,000 \r
$2,650
(You Answered) (Correct Answer) $2,150
$2,890
$2,600
Question 18
Correct
Tony Close, who is self-employed, paid $20,000 to rent a 20-seat skybox at Wrigley Field for seven baseball games. The cost of the regular, nonluxury box seats is $45 a seat. How much can Tony deduct of the skybox rental?
(You Answered) (Correct Answer) $3,150
$10,000
$6,300
$13,700
Question 19
Correct
Ned Smith is self-employed. At the end of the year, Ned gives an assorted gourmet food basket to two of the executives of a client to thank them for their business. Each gift basket cost $100 each, for a total of $200. How much can Ned deduct for the gourmet food baskets?
$25
(You Answered) (Correct Answer) $50
$100
$200
Question 20
Correct
Anna Smith is a self-employed real estate broker. During the year, Anna sold 10 houses. At the closing, Anna would give her clients a gift item for their new home, which cost $25. As a Christmas gift, Anna sent out a magnetized calendar to her clients. Anna’s name and business address were written on the calendar. The cost of each calendar was $3.75 excluding the cost of postage. Anna purchased and sent out 100 calendars. What amount can Anna deduct as a business gift and as another business expense, respectively?
(You Answered) (Correct Answer) Business gift, $250; other business expense, $375
Business gift, $625; other business expense, $0
Business gift, $0; other business expense, $625
None of the above
Question 21
Incorrect
Tim Davis is president of a small manufacturing company. During the year, Tim incurred the following entertainment expenses that were reimbursed by the company: $200 for dues to a social club. Tim took his customers to the social club for business conferences and did not use it in any other way. The cost of the meals provided to Tim’s customers while dining with him at the club totaled $1,800; Tim’s meals during those meeting with customers were $500. Also during the year, Tim gave gifts to six customers. Each gift cost $100. Finally, Tim gave watches worth $100 each to three foremen in his manufacturing plant as part of a plant safety achievement award. What amount of the reimbursed expenses is deductible by Tim’s employer?
(Correct Answer) $1,600
(You Answered) $1,700
$1,350
$1,850
Question 22
Incorrect
Henry Clay, who is self-employed, incurred the following expenses during the year: \r\rFees for taking his customers out to play golf after a morning business meeting that Henry's customers attended \r$ 600 \rLunches with customers in which business was discussed at all of the lunches 1,500 \rHoliday gifts ($55 fruit basket to 20 customers) 1,100 \rDues to a country club, used 75% for business (60% for directly related entertainment and 15% for associated entertainment) 1,000 \r\rWhat amount can Henry deduct as meals and entertainment on Schedule C?
$2,100
(You Answered) $1,425
$1,925
(Correct Answer) $1,050
Question 23
Correct
George Williams, a teacher, attends a 3-day seminar in Las Vegas, Nevada. The seminar covers investing in income-producing property. What travel expenses can George deduct from attending the seminar, assuming that George can itemize and has other miscellaneous itemized deductions in excess of 2 percent of his adjusted gross income?
Round-trip airfare to Las Vegas
Hotel accommodations for 3 days
50 percent of meals for 3 days
(You Answered) (Correct Answer) None of the above expenses
Question 24
Correct
Priscilla Thomas lives and works in Little Rock, Arkansas. Her employer sent her to San Diego, California, on business for 3 days. Priscilla’s employer paid the hotel directly for her lodging, and reimbursed Priscilla $75 a day ($225 total) for meals and incidental expenses. Priscilla’s actual meal expenses were not more than the federal per diem rate for Little Rock of $65 per day. How much will Priscilla’s employer include in her income for the excess amount of its reimbursement?
$0
$20
(You Answered) (Correct Answer) $30
$10
Question 25
Correct
All of the following would be included as taxable wages subject to withholding and employment taxes, except:
Employer excess unsubstantiated reimbursements under an accountable plan
Employer reimbursement under a nonaccountable plan
(You Answered) (Correct Answer) Employer reimbursement under an accountable plan
None of the above
Question 26
Correct
Tonya Redman’s employer advances her $1,500 from an accountable reimbursement plan to cover Tonya’s costs at a weeklong convention in Miami, Florida. Upon her return, Tonya turns in $1,250 of receipts to her employer and does not return the excess. What amount must Tonya’s employer include in her wages on her Form W-2?
$0
(You Answered) (Correct Answer) $250
$1,250
$1,500
Question 27
Correct
Matt Weldon is an architect who lives and works in Phoenix, Arizona. Matt takes a temporary assignment in Boston, Massachusetts, that is scheduled to last 9 months. After 9 months, Matt is informed that the assignment will actually last 11 months. Matt returns to Phoenix after 11 months. Matt will be able to deduct his travel expenses for the time he spends in Boston.
(You Answered) (Correct Answer) True
False
Question 28
Correct
Tony Ronald’s employer advances him $2,500 from an accountable reimbursement plan to cover his costs at a weeklong conference in Seattle, Washington. Upon his return, Tony turns in $2,150 of receipts to his employer and does not return the excess. Which of the following statements is true regarding the employer’s treatment of the allowance?
Tony’s employer is required to increase Tony’s taxable wages by $350. Tony’s employer must withhold income taxes, but not employment taxes on this amount.
Tony’s employer is required to increase Tony’s taxable wages by $2,500. Tony’s employer must withhold income taxes, but not employment taxes on this amount.
(You Answered) (Correct Answer) Tony’s employer is required to increase Tony’s taxable wages by $350. Tony’s employer must withhold income taxes as well as employment taxes on this amount.
Tony’s employer is required to increase Tony’s taxable wages by $2,500. Tony’s employer must withhold income taxes as well as employment taxes on this amount.
Question 29
Correct
Tina Davis attended a business conference given on a U.S.-flag cruise ship. The cost of the 7-day cruise was $3,800. Meals and entertainment of $500 were separately stated on the bill. If the maximum federal per diem rate during the year is $250, what amount can Tina deduct on her income tax return for the cost of the cruise?
(You Answered) (Correct Answer) $3,500
$1,750
$3,800
$3,550
Question 30
Correct
Isabel Howard, CEO of ABC Corporation, takes a 6-day domestic business trip. Isabel spends 3 days conducting business and 3 days vacationing. Her costs for the trip include $320 for airfare, $155 a night for the hotel (3 were business-related), and $70 a day for meals (3 days of which were for business). If ABC reimburses Isabel for her business trip, how much can it deduct on its corporate tax return?
(You Answered) (Correct Answer) $570
$890
$675
$995