tax problems - questions...............
Question # 00029827
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Updated on: 10/29/2014 11:14 PM Due on: 11/12/2014
43. LO.5 In each of the following independent situations, determine how much, if any, qualifies as a deduction for AGI under § 222 (qualified tuition and related expenses):
a. Lily is single and is employed as an architect. During 2013, she spends $4,100 in tuition to attend law school at night. Her MAGI is $64,000.
b. Liam is single and is employed as a pharmacist. During 2013, he spends $2,400 ($2,100 for tuition and $300 for books) to take a course in herbal supplements at a local university. His MAGI is $81,000.
c. Hailey is married and is employed as a bookkeeper. She spends $5,200 for tuition and $900 for books and supplies pursuing a bachelor’s degree in accounting. Her
MAGI is $40,000 on the separate return she files.
d. John spends $6,500 of his savings on tuition to attend Carmine State College. John is claimed as a dependent by his parents.
e. How much, if any, of the above amounts not allowed under § 222 might otherwise qualify as a deduction from AGI?
44. LO.6, 9 Eric is a licensed commercial pilot who works for Snipe Charter Jet Service.
Typically, Eric, who lives near the airport, flies a charter out of Tupelo (MS), to either Las Vegas or Reno, spends several nights there, and then returns home with the same group. Snipe provides Eric with a travel allowance of $1,800 per month but requires no accountability. For the current calendar year, Eric had the following job-related expenses:
Meals $ 7,000
Lodging 10,000
Transportation (taxis, limos) 500
Uniforms 1,300
Dry cleaning of uniforms 400
Annual physical exam 1,500
The uniforms are required to be worn on the job. The Federal Aviation Administration requires the annual physical exam for the maintenance of a commercial pilot’s license. How may Eric treat these expenses for Federal income tax purposes?
45. LO.6 Stork Associates paid $60,000 for a 20-seat skybox at Veterans Stadium for eight professional football games. Regular seats to these games range from $80 to $250 each.
At one game, an employee of Stork entertained 18 clients. Stork furnished food and beverages for the event at a cost of $1,300. The game was preceded by a bona fide business discussion, and all expenses are adequately substantiated.
a. How much may Stork deduct for this event?
b. What, if any, is the deduction if no representative from Stork attended the game?
c. What if there was no bona fide business discussion either before or after the event?
46. LO.6 During the current year, Paul, the vice president of a bank, made gifts in the following amounts:
To Sarah (Paul’s personal assistant) at Christmas $36
To Darryl (a key client)—$3 was for gift wrapping 53
To Darryl’s wife (a homemaker) on her birthday 20
To Veronica (Paul’s boss) at Christmas 30
In addition, on professional assistants’ day, Paul takes Sarah to lunch at a cost of $82.
Presuming that Paul has adequate substantiation and is not reimbursed, how much can he deduct?
47. LO.7 Melanie is employed full-time as an accountant for a national hardware chain.
She also has a private consulting practice, which provides tax advice and financial planning to the general public. For this purpose, she maintains an office in her home.
Expenses relating to her home are as follows:
Real property taxes $3,600
Interest on home mortgage 3,800
Operating expenses of home 900
Depreciation allocated to 20% business use 1,500
Melanie’s income from consulting is $17,000, and the related expenses are $5,000.
a. What is Melanie’s office in the home deduction?
b. Suppose Melanie also spent $4,000 to repaint and replace the carpet in the office.
How do these additional costs change the answer to part (a)?
c. Suppose Melanie’s income from consulting is only $8,000 (not $17,000). How does this change the answer to part (a)?
48. LO.7 Christine is a full-time teacher of the fourth grade at Vireo Academy. During the current year, she spends $1,400 for classroom supplies. On the submission of adequate substantiation, Vireo reimburses her for $500 of these expenses—the maximum reimbursement allowed for supplies under school policy. [The reimbursement is not shown as income (Box 1) of Form W–2 given to Christine by Vireo.] What are the income tax consequences of the $1,400 if Christine:
a. Itemizes her deductions from AGI?
b. Chooses the standard deduction?
49. LO.8 Amber’s employer, Lavender, Inc., has a § 401(k) plan that permits salary deferral elections by its employees. Amber’s salary is $99,000, and her marginal tax rate is 33%.
a. What is the maximum amount Amber can elect for salary deferral treatment for 2013?
b. If Amber elects salary deferral treatment for the amount in (a), how much can she save in taxes?
c. What amount would you recommend that Amber elect for salary deferral treatment for 2013?
50. LO.8 Shyam is a participant in a SIMPLE § 401(k) plan. He elects to contribute 4% of his $40,000 compensation to the account, while his employer contributes 3%. What amount will not vest immediately, if any?
51. LO.8 Harvey is a self-employed accountant with earned income from the business of $120,000 (after the deduction for one-half of his self-employment tax). He has a profit sharing plan (e.g., defined contribution Keogh plan). What is the maximum amount
Harvey can contribute to his retirement plan in 2013?
52. LO.8 Answer the following independent questions with respect to traditional IRA contributions for 2013:
a. Juan, age 41, earns a salary of $28,000 and is not an active participant in any other qualified plan. His wife, Agnes, has no earned income. What is the maximum total deductible contribution to their IRAs? Juan wants to contribute as much as possible to his own IRA.
b. Abby, age 29, has earned income of $25,000, and her husband, Sam, has earned income of $2,600. They are not active participants in any other qualified plan. What is the maximum contribution to their IRAs?
c. Leo’s employer makes a contribution of $3,500 to Leo’s simplified employee pension plan. If Leo is single, has earned income of $32,000, and has AGI of $29,000, what amount, if any, can he contribute to an IRA?
53. LO.8 Jimmy establishes a Roth IRA at age 47 and contributes a total of $89,600 over 18 years. The account is now worth $112,000. How much of these funds may Jimmy withdraw tax-free?
54. LO.8 Carri and Dane, ages 34 and 32, respectively, have been married for 11 years, and both are active participants in employer qualified retirement plans. Their total AGI in
2013 is $181,000, and they earn salaries of $87,000 and $95,000, respectively. What amount may Carri and Dane:
a. Contribute to regular IRAs?
b. Deduct for their contributions in (a)?
c. Contribute to Roth IRAs?
d. Deduct for their contributions in (c)?
e. Contribute to Coverdell Education Savings Accounts for their three children?
55. LO.3, 6, 9 Charles has AGI of $94,000 during the year and the following expenses related to his employment:
Lodging while in travel status $5,000
Meals during travel 4,000
Business transportation 6,000
Entertainment of clients 3,800
Professional dues and subscriptions 800
Charles is reimbursed $14,000 under his employer’s accountable plan. What are his deductions for and from AGI?
56. LO.3, 6, 9 During the year, Brenda has the following expenses related to her employment:
Airfare $8,500
Meals 4,000
Lodging 4,900
Transportation while in travel status (taxis and limos) 940
Entertainment of clients 8,000
Although Brenda renders an adequate accounting to her employer, she is reimbursed for only $12,000 of the above expenses. What are Brenda’s tax consequences based on the following assumptions?
a. The $12,000 reimbursement does not designate which expenses are covered.
b. The reimbursement specifically covers only the meals and entertainment expenses.
c. The reimbursement covers any of the expenses other than meals and entertainment.
d. If Brenda has a choice of reimbursement procedures [parts (a), (b), or (c) above], which should she select? Why?
57. LO.6, 9, 10 Audry, age 38 and single, earns a salary of $59,000. She has interest income of $1,600 and has a $2,000 long-term capital loss from the sale of a stock investment.
Audry incurs the following employment-related expenses during the year:
Transportation $5,500
Meals 2,800
Lodging 4,200
Entertainment of clients 2,200
Professional dues and subscriptions 300
Under an accountable plan, Audry receives reimbursements of $4,500 from her employer. Calculate her AGI and itemized employee business expenses.
58. LO.5, 7, 10 B. J. and Carolyn Grace are full-time employees. B. J. is an elementary school teacher, and Carolyn is a registered nurse at a hospital. During the year, they incur the following employment-related expenses:
School supplies for use in the classroom $1,400
Emergency room uniforms 800
Union dues (teachers association) 200
Job hunting expenses (Carolyn obtained another nursing position but decided not to change jobs) 1,300
Continuing education correspondence courses (required to maintain nursing license) 380
Professional dues and subscriptions 1,100
None of these expenses are reimbursed by the employers.
For the year, the Graces file a joint return reflecting salary income of $90,000. They also have gambling income of $6,000 and gambling losses of $7,000 (fully substantiated).
They pay $400 to have their tax return prepared. They have other itemized deductions (i.e., interest on home mortgage, property taxes on personal residence, state income taxes, and charitable contributions) of $14,500. Determine the total amount of itemized deductions allowed to the Graces.
59. LO.1, 2, 4, 5, 7, 10 Complete the following table by classifiying each of the independent expenditures (assume that no reimbursement takes place).
Expense Item
Deductible for AGI
Deductible from AGI
Not
Deductible
a. Moving expense of an employee ______ ______ ______
b. Tax return preparation fee incurred by an employed plumber ______ ______ ______
c. Safety glasses purchased by an employed pipefitter ______ ______ ______
d. Dues to auto club (e.g., AAA) for taxpayer who uses the automatic mileage method ______ ______ ______
e. Nursing refresher course for taxpayer who retired from nursing five years ago ______ ______ ______
f. Gambling loss not in excess of gambling gain by a self-employed architect ______ ______ ______
g. Contribution to Roth IRA by a selfemployed attorney ______ ______ ______
Expense Item
Deductible for AGI
Deductible from AGI
Not
Deductible
h. Business travel expenses by a statutory employee ______ ______ ______
i. Job hunting expense by an elementary school teacher seeking a position as an elementary school principal ______ ______ ______
j. Cost of bar exam review course taken by a recent law school graduate ______ ______ ______
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