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Individul Income Tax Concepts

Statutory employees:
a. Report their expenses on Form 2106.
b. Include common law employees.
c. Are subject to income tax withholdings.
d. Claim their expenses as deductions for AGI.
e. None of the above.

Felicia works as an auditor for a large major CPA firm. During the months of October and November of each year, she is permanently assigned to the team auditing Teal Corporation. As a result, every day she drives from her home to Teal and returns home after work. Mileage is as follows:
Home to office 15
Home to Teal 40
Office to Teal 22
For these two months, Felicia's deductible mileage for each workday is:
a. 0.
b. 22.
c. 40.
d. 80.
e. None of the above.

Bill is the regional manager for a national chain of auto-parts stores and is based in Salt Lake City. When the company opens new stores in Boise, Bill is given the task of supervising their initial operation. For three months, he works weekdays in Boise and returns home on weekends. He spends $410 returning to Salt Lake City but would have spent $390 had he stayed in Boise for the weekend. As to the weekend trips, how much, if any, qualifies as a deduction?
a. $0, since the trips are personal and not work related.
b. $0, since Bill's tax home has changed from Salt Lake City to Boise.
c. $390.
d. $410.
e. None of the above.

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?
a. Dr. Jones, a general dentist, attends a two-day seminar on developing a dental practice.
b. Dr. Brown, a surgeon, attends a two-day seminar on financial planning.
c. Paul, a romance language high school teacher, spends summer break in France, Portugal,and Spain improving his language skills.
d. Myrna went on a two-week vacation in Boston. While there, she visited her employer's home office to have lunch with former co-workers.
e. None of the above.

During the year, Hugh went from Cleveland to Fairbanks on business. Preceding a five-day business meeting, he spent four days vacationing at a dude ranch. Excluding the dude ranch costs, his expenses for the trip are:
Air fare $1,800
Lodging 600
Meals 500
Entertainment 300
Presuming no reimbursement, deductible expenses are:
a. $3,200.
b. $3,050.
c. $2,800.
d. $1,900.
e. None of the above.

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Solution Preview

For the statutory employees question:
A is incorrect because the expenses are reported on Schedule C.
B is incorrect because statutory employees are NOT common law employees.
C is incorrect because the wages are NOT subject to income tax withholding.
D is the CORRECT ANSWER, statutory employees deduct their expenses FOR AGI.
E therefore is also incorrect.

The question on the mileage for Felicia is computed as follows
Home to Teal ...

Solution Summary

This solution is in question and answer format concerning various individual income tax concepts:statutory employee, travel expenses, and mileage.