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Exam 11: Individuals As Employees and Proprietors

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Question 61

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Sarah's employer pays the hospitalization insurance premiums for a policy that covers all employees and retired former employees.After Sarah retires,the hospital insurance premiums paid for her by her employer can be excluded from her gross income.

A) True
B) False

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Question 62

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Mauve Company permits employees to occasionally use the copying machine for personal purposes.The copying machine is located in the office where the higher paid executives work,so they occasionally use the machine.However,the machine is not convenient for use by the lower paid warehouse employees and,thus,they never use the copier.The use of the copy machine may not be excluded from gross income because the benefit is discriminatory.

A) True
B) False

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Question 63

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If an individual is ineligible to make a deductible contribution to a traditional IRA,nondeductible contributions of any amount can be made to a traditional IRA.

The maximum annual contribution to a Roth IRA for an unmarried taxpayer who is age 35 is the smaller of $5,500 or the individual's compensation for the year.

A taxpayer who maintains an office in the home to conduct his only business will not have nondeductible commuting expense.

Margaret is trying to decide whether to place funds in a qualified tuition program.Her son will be attending college in 4 years.She is in the 35% marginal tax bracket and she believes she can earn an 7% before tax return on alternative investments.Thus,$10,000 will accumulate to $11,948 (after-tax)in 4 years.Margaret expects tuition to increase at the rate of 5% each year to $12,155 in 4 years.Her son will be in the 15% marginal tax bracket in all relevant years.Given these assumptions,should Margaret participate in the qualified tuition program?

How are combined business/pleasure trips treated for travel within the United States as opposed to foreign travel?

Lloyd,a practicing CPA,pays tuition to attend law school.Since a law degree involves education leading to a new trade or business,the tuition is not deductible.

After the automatic mileage rate has been set by the IRS for a year,it cannot later be changed by the IRS.

Bob lives and works in Newark,NJ.He travels to London for a three-day business meeting,after which he spends three days touring Scotland.All of his air fare is deductible.

Employees of the Valley Country Club are allowed to use the golf course without charge before and after working hours on Mondays,when the number of players on the course is at its lowest.Tom,an employee of the country club played 40 rounds of golf during the year at no charge when the non-employee charge was $20 per round.

Madison and Christopher are staff accountants at a major public accounting firm.Both are pursuing a law degree in a night program at local law school.Madison contends that the cost of the program is a deduction for income tax purposes,while Christopher maintains that it is not.Who is correct and why?

Allowing for the cutback adjustment (50% reduction for meals and entertainment) ,which of the following trips,if any,will qualify for the travel expense deduction?

Under the Swan Company's cafeteria plan,all full-time employees are allowed to select any combination of the benefits below,but the total received by the employee cannot exceed $8,000 a year. I.Group medical and hospitalization insurance for the employee,$3,600 a year. II) ​Group medical and hospitalization insurance for the employee's spouse and children,$1,200 a year. III) Child-care payments,actual cost but not more than $4,800 a year. IV) Cash required to bring the total of benefits and cash to $8,000. ​Which of the following statements is true?

On February 1,2015,Tuan withdrew $15,000 from his IRA #1.He deposited the funds back into IRA #1 within 60 days (a"rollover").Tuan may do one more nontaxable rollover distribution from either IRA #1 or IRA #2 starting in April 2015.

Both traditional and Roth IRAs possess the advantage of tax-free accumulation of income within the plan.

James has a job that compels him to go to many different states during the year.It is possible that James was never away from his tax home during the year.

Contributions to a Roth IRA can be made up to the due date (excluding extensions)of the taxpayer's income tax return.

A U.S.citizen who works in France from February 1,2015 until January 31,2016 is eligible for the foreign earned income exclusion in 2015 and 2016.

For tax purposes,"travel" is a broader classification than "transportation."