Determine whether the following expenses are either deductible for AGI or from AGI or nondeductible

Asked by bizgrad
Dated: 9th Jun'18 12:10 PM
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My Accounting Lab Quiz Chapter 9

1. Determine whether the following expenses are either deductible for AGI or from AGI or nondeductible on an​ employee's return. Indicate whether the expenses are subject to the​ 2% nondeductible floor for miscellaneous itemized deductions.

a. Non-deductible, No

b. From AGI, Yes

c. From AGI, Yes

d. For AGI, No

2. Which of the following deduction items are subject to the​ 2% nondeductible floor applicable to miscellaneous itemized​ deductions?

a. Yes

b. Yes

c. Yes

d. No

e. No

f. Yes

g. No

h. Yes

3. If an employee​ (or self-employed​ individual) uses the standard mileage rate method for the year in which an automobile is​ acquired, may the actual expense method be used in a subsequent​ year? If​ so, what restrictions are imposed​ (if any) on depreciation​ methods? What adjustments to basis are​ required?

a. The actual expense method may not be used in subsequent​ years, once the standard mileage rate method is selected then that has to be used to the life of the automobile.

b. The actual expense method may be used in subsequent years. ​However, MACRS under the regular method may not be used for computing depreciation​ (straight-line method is​ required) and the basis of the automobile must be reduced by 23 cents in 2013 and​ 2012, 22 cents in​ 2011, 23 cents in​ 2010, and 21 cents per mile in 2008 and 2009.

c. The actual expense method may be used in subsequent years. ​ However, MACRS under the regular method must be used for computing depreciation​ (straight-line method is​ required) and the basis of the automobile must be reduced by 23 cents in 2013 and​ 2012, 22 cents in​ 2011, 23 cents in​ 2010, and 21 cents per mile in 2008 and 2009.

d. None of the above.

4. Len incurs​ $2,000 of deductible moving expenses in the current year and is fully reimbursed by his employer in the same year.

(A)How are the expense deduction and the reimbursement reported on​ Len's tax return if he uses the standard​ deduction?

a. Len's moving expenses are deductible for AGI only if Len uses the standard deduction. The​ $2,000 reimbursement would offset the​ $2,000 of moving expenses. ​ Thus, no amount would be reported on​ Len's tax return.

b. Len's moving expenses are deductible for AGI so that it does not matter whether Len uses the standard deduction. The​ $2,000 reimbursement would offset the​ $2,000 of moving expenses. ​ Thus, no amount would be reported on​ Len's tax return.

c. Len's moving expenses are not deductible for AGI if Len uses the standard deduction. The​ $2,000 reimbursement would be included in​ Len's gross income on his tax return.

d. None of the above.

(B) What tax consequences occur if the reimbursement is​ $2,000 but only​ $1,200 of the​ $2,000 of moving expenses are tax​ deductible?

a. The reimbursement for moving expenses of​ $2,000 must be included in​ Len's gross income.

b. The reimbursement for nondeductible moving expenses of​ $800 must be included in​ Len's gross income.

c. The reimbursement for moving expenses of​ $1,200 must be included in​ Len's gross income.

d. None of the above.

5. Latasha is a​ self-employed attorney who entertains clients and potential clients in her home.

(A)What requirements must be met to qualify the outlays as deductible entertainment​ expenses?

a. To be deductible the expenditure must be either​ (1) "directly related​ to" the active conduct of a trade or business or​ (2) "associated​ with" the active conduct of a trade or business.

b. To be deductible the expenditure must be incurred by a taxpayer engaged in a trade or business activity.

c. To be deductible the expenditure must be any expense incurred in a trade or​ business, except for business meals or entertainment expenses and those determined to be lavish or extravagant.

d. To be deductible the expenditure must be both​ (1) "directly related​ to" the active conduct of a trade or business and​ (2) not deemed to be lavish or extravagant.

(B) What is the difference between​ "directly related" and​ "associated with"​ entertainment?

a. Only after a direct business benefit is received can the entertainment of clients be classified as​ "directly related" expenses. Entertainment of potential clients constitutes​ "associated with" entertainment. ​ "Associated with" entertainment expenses can only be incurred before a bona fide business meeting.

b. There is no difference between the terms​ "directly related" and​ "associated with".

c. If there is some direct business benefit expected to be​ received, the entertainment of clients should be classified as​ "directly related" expenses. Entertainment of potential clients constitutes​ "associated with" entertainment. ​ "Associated with" entertainment expenses must be incurred prior to or after a bona fide business meeting.

d. If there is some business benefit expected to be​ received, the entertainment of clients should be classified as​ "associated with" expense. Entertainment of potential clients constitutes​ "directly related" entertainment expense and must be incurred prior to or after a bona fide business meeting.

6. Atlantic Corporation provides a cafeteria for its employees. The meal charges are set at a sufficiently high level that the employees are not taxed on the subsidized eating facilities. Are​ Atlantic's cafeteria-related costs subject to the​ 50% disallowance for business​ meals?

a. Yes, they are business fringe benefits under Sec. 132 but are subject to the​ 50% limit.

b. No, they are business fringe benefits under Sec. 132 and are not subject to the​ 50% limit.

c. Yes, they are business entertaining expenses under Sec. 274 and are subject to the​ 50% limit.

d. No, they are business entertaining expenses under Sec. 274 but are not subject to the​ 50% limit.

7. If an individual belongs to a country club and uses the facility primarily for business entertainment of​ customers, what portion of the club dues is​ deductible?

a. All of the club dues are considered to be a​ business, deductible​ expense, as well​ as, specific business expenses​ (e.g., meals with​ customers) incurred at the club are deductible subject to the​ 50% disallowance rule.

b. 50% of the club dues are considered to be a​ business, deductible​ expense, as well​ as, specific business expenses​ (e.g., meals with​ customers) incurred at the club are deductible subject to the​ 50% disallowance rule.

c. The club dues are deductible based on the ratio of revenue generated from the club membership. For example if​ 30% of revenues were earned because of the club​ membership, 30% of the club dues are deductible.

d. None, the club dues are considered to be a​ personal, nondeductible expense despite the fact that the use of the facility is primarily for business. Specific business expenses​ (e.g., meals with​ customers) incurred at the club are deductible subject to the​ 50% disallowance rule.

8. Austin Corporation is proposing the establishment of a pension plan that will cover only employees with salaries in excess of​ $125,000. No other employees are covered under comparable qualified plans. What problems​ (if any) do you envision regarding the​ plan's qualification with the​ IRS?

a. The plan is discriminatory because it favors​ highly-compensated employees. As a result the plan should be considered to be a nonqualified plan by the IRS. Under a nonqualified plan the employer will not be able to deduct any of the pension contributions.

b. The plan is discriminatory because it favors​ highly-compensated employees. As a result the plan should be considered to be a nonqualified plan by the IRS. The employer should not be able to receive the immediate tax deduction for pension contributions. Under a nonqualified plan the​ employer's deduction is generally deferred until the employee recognizes income from the plan.

c. An employer has the right to only offer pension plan benefits to certain types of employees. The plan can discriminate to employees within the requirements of salaries in excess of​ $125,000. Under a qualified plan the employer will be able to deduct all of the pension contributions.

d. None of the above.

Determine whether the following expenses are either deductible for AGI or from AGI or nondeductible
Answered by bizgrad
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Dated: 9th Jun'18 12:10 PM
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