tax problems - questions

31. LO.2 Ella is the regional sales manager for a fast-food chain. She starts her work day by driving from home to the regional office, works there for several hours, and then visits the three sales outlets in her region. Relevant mileage is as follows:
Home to regional office 10
Regional office to sales outlet 1 13
Sales outlet 1 to sales outlet 2 11
Sales outlet 2 to sales outlet 3 9
Sales outlet 3 to home 15
If Ella uses the automatic mileage method and works 240 days in 2013, what is her deduction for the year?

32. LO.2 Jackson uses his automobile 90% for business and during 2013 drove a total of

14,000 miles. Information regarding his car expenses is listed below.
Business parking $ 140
Auto insurance 1,300
Auto club dues (includes towing service) 180
Toll road charges (business-related) 200
Oil changes and engine tune-ups 210
Repairs 160
Depreciation allowable 2,850
Fines for traffic violations (incurred during business use) 320
Gasoline purchases 2,800
What is Jackson’s deduction in 2013 for the use of his car if he uses:
a. The actual cost method?
b. The automatic mileage method?

33. LO.2 On July 1, 2009, Rex purchases a new automobile for $40,000. He uses the car

80% for business and drives the car as follows: 8,000 miles in 2009, 19,000 miles in 2010,

20,000 miles in 2011, and 15,000 miles in 2012. Determine Rex’s basis in the auto as of
January 1, 2013, under the following assumptions.
a. Rex uses the automatic mileage method.
b. Rex uses the actual cost method. [Assume that no § 179 expensing is claimed and that 200% declining-balance cost recovery with the half-year convention is used—see Chapter 8. The recovery limitation for an auto placed in service in 2009 is as follows: $2,960 (first year), $4,800 (second year), $2,850 (third year), and $1,775 (fourth year).]

34. LO.3 Kristen, the regional manager for a national hardware chain, is based in Atlanta.
During March and April of this year, she has to replace temporarily the district manager in Jackson, Mississippi. During this period, Kristen flies to Jackson on Sunday night, spends the week at the district office, and returns home to Atlanta on Friday afternoon.
The cost of returning home is $550, while the cost of spending the weekend in Jackson would have been $490.
a. Presuming no reimbursement by her employer, how much, if any, of these weekend expenses may Kristen deduct?
b. Would your answer in (a) change if the amounts involved are reversed (i.e., the trip home cost $490; staying in Jackson would have been $550)? Explain.

35. LO.3, 6 In June of this year, Dr. and Mrs. Bret Spencer traveled to Denver to attend a three-day conference sponsored by the American Society of Implant Dentistry. Bret, a practicing oral surgeon, participated in scheduled technical sessions dealing with the latest developments in surgical procedures. On two days, Mrs. Spencer attended group meetings where various aspects of family tax planning were discussed. On the other day, she went sightseeing. Mrs. Spencer does not work for her husband, but she does their tax returns and handles the family investments. Expenses incurred in connection with the conference are summarized below.
Airfare (two tickets) $2,000
Lodging (single and double occupancy are the same rate—$250 each day) 750
Meals ($200 × 3 days)* 600
Conference registration fee (includes $120 for
Family Tax Planning sessions) 620
Car rental 300 * Split equally between Dr. and Mrs. Spencer.
How much, if any, of these expenses can the Spencers deduct?

36. LO.1, 3, 6 Kim works for a clothing manufacturer as a dress designer. She travels to
New York City to attend five days of fashion shows and then spends three days sightseeing.
Her expenses are as follows:
Airfare $1,500
Lodging (8 nights) 1,920
Meals (8 days) 1,440
Airport transportation 120 [Assume that lodging/meals are the same amount for the business and personal portion of the trip (e.g., $180 per day for meals).]
a. Presuming no reimbursement, how much can Kim deduct as to the trip?
b. Would the tax treatment of Kim’s deduction differ if she was an independent contractor (rather than an employee)? Explain.

37. LO.3 On Thursday, Justin flies from Baltimore (his home office) to Cadiz (Spain). He conducts business on Friday and Tuesday; vacations on Saturday, Sunday, and Monday (a legal holiday in Spain); and returns to Baltimore on Thursday. Justin was scheduled to return home on Wednesday, but all flights were canceled due to bad weather. Therefore, he spent Wednesday watching floor shows at a local casino.
a. For tax purposes, what portion of Justin’s trip is regarded as being for business?
b. Suppose Monday was not a legal holiday. Would this change your answer in (a)?
Explain.
c. Under either (a) or (b), how much of Justin’s airfare qualifies as a deductible business expense?

38. LO.3 Monica travels from her office in Boston to Lisbon, Portugal, on business. Her absence of 13 days was spent as follows:
Thursday Depart for and arrive at Lisbon
Friday Business transacted
Saturday and Sunday Vacationing
Monday through Friday Business transacted
Saturday and Sunday Vacationing
Monday Business transacted
Tuesday Depart Lisbon and return to office in Boston
a. For tax purposes, how many days has Monica spent on business?
b. What difference does it make?
c. Could Monica have spent more time than she did vacationing on the trip without loss of existing tax benefits? Explain.

39. LO.4 Caden, a financial planner, decides to quit his job with an investment bank in
Charleston, South Carolina, and establish a private practice in Santa Fe, New Mexico. In connection with the move, he incurs the following expenses:
Moving van charge $4,500
Lodging during move 540
Meals during move 410
Loss on sale of residence in Charleston $9,000
Mileage for personal autos 3,500 miles
How much of these expenses, if any, can Caden deduct?

40. LO.4, 7 Upon losing his job as a plant manager in Quincy (Massachusetts), Anthony incurs $6,200 in job search expenses. Having no success in finding new employment in the same type of work, Anthony moves to Clearwater (Florida) in 2013 and begins a charter boat business. His expenses in connection with the move are summarized below.
Penalty for breaking lease on Quincy rented residence $2,800
Forfeiture of membership in Quincy Country Club 2,200
Packing and moving van charges 7,100
Lodging during move (3 nights) 380
Meals during move 360
Mileage (for two automobiles) 2,400 miles
How much of these expenses may Anthony deduct?

41. LO.4 After being downsized by his former employer, in November 2012, Wayne moves from Minnesota to Alabama to accept a new job. When filing his Federal income tax return for 2012, Wayne deducts the $14,000 in moving expenses he incurred (none of which were reimbursed by either his former or new employer). On June 6, 2013,
Wayne’s employment terminates. What are the tax consequences if the termination occurred because:
a. Wayne was killed by a drunk driver?
b. Wayne was downsized by the new employer?
c. Wayne was fired by the new employer because he assaulted a client?
d. Wayne quit because he inherited a large amount of money and decided he did not want to work anymore?

42. LO.5 Elijah is employed as a full-time high school teacher. The school district where he works recently instituted a policy requiring all of its teachers to start working on a master’s degree. Pursuant to this new rule, Elijah spent most of the summer of 2013 taking graduate courses at an out-of-town university. His expenses are as follows:
Tuition $6,600
Books and course materials 1,500
Lodging 1,700
Meals 2,200
Laundry and dry cleaning 200
Campus parking 300
In addition, Elijah drove his personal automobile 2,200 miles in connection with the education. He uses the automatic mileage method.
a. How much, if any, of these expenses might qualify as deductions for AGI?
b. How much, if any, of these expenses might qualify as deductions from AGI?