Exam 2 Study Questions

Complete the statements below regarding Section 222. Under § 222, a deduction for AGI is allowed for qualified tuition and related expenses involving higher education (i.e., postsecondary). The deduction is the lesser of the qualifying amount spent or the maximum amount allowed by § 222. What is the maximum amount allowed for a single taxpayer with the following MAGI? If an amount is zero, enter "0". MAGI of $90,000: MAGI of $68,000: MAGI of $45,000:

$0, $2,000, $4,000 $4,000 can be deducted if your MAGI does not exceed 65,000/130,000. $2,000 can be deducted if your MAGI does not exceed 80,000/160,000 $0 can be deducted if your MAGI exceeds 80,000/160,000 can only be tuition and expenses required to attend. not books. it's available to the taxpayer, spouse, and dependents.

Any individual who has estimated tax for the year of $(______) or more and whose withholding (does/doesn't) equal or exceed the required annual payment must make quarterly payments. The required annual payment is the (smaller/larger) of (1) ______% of the tax shown on the current year's return or (2) ______% of the tax shown on the preceding year's return. If the AGI on the preceding year's return exceeds $150,000, the requirement is increased to ______%.

$1000, doesn't, smaller, 90%, 100%, 110%

Ion corp offers its employees (on a nondiscriminatory basis) a choice of any one or all of the following benefits: Group term life insurance $700 Hospitalization insurance for fam members $2800 Child care payments $1700 Total $5200 If benefit is not selected, the employee receives cash equal to the cost of the benefit. Sarah, an employee, elects to receive the group term life insurance, hospitalization insurance for family members, and $1700 cash. How much must Sarah include in gross income?

$1700

In 2020, Ava, an employee, who files single, has AGI of $51,900 and incurred the following miscellaneous itemized deductions this year: Union dues and work uniforms: $1,110 Home office expenses: $3,330 Unreimbursed employee expenses: $1,554 Gambling losses to the extent of gambling winnings: $2,200. What is Ava's total itemized deduction related to these items?

$2,200 (Only Gambling losses are deductible because of the Misc Itemized deductions are gone)

Cal, who is single, reports a compensation income of $72000 in 2021. He is an active participant in his employer's qualified retirement plan. Cal contributes $6000 to a traditional IRA. Of the $6000 contribution, how much can Cal deduct? AGI/ filing status, phaseout begin, phaseout end: Single HOH, $66000, $76000 Married file joint, $105000, $125000 Married file separate, $0, $10000

$2400 ((76000-72000)/(76000-66000)) x 6000

Amir, who files single, has AGI of $58,000 and incurred the following itemized deductions this year: Union dues and work uniforms: $350 Home office expenses: $1,200 Unreimbursed employee expenses: $415 Gambling losses to the extent of gambling winnings: $890. What is Amir's total itemized deduction related to these items? $_______

$890

In the current year, Joselyn travels from Houston, Texas to Miami, Florida primarily for business. She spends three days conducting business and two days sightseeing (the day before and the day after business). Her plane and taxi fare amounts to $890. Her meals amount to $160 per day, and lodging and incidental expenses are $275 per day. She is self-employed. Her deduction for these expenses is as follows: Plane and taxi expenses: $_____ Meals:$____ Lodging and incidental expenses: $______

$890 $240 [3 days x ($160 x 50%)] $825 (3 days x $275).

In the current year, Chastain takes a trip from Charleston, South Carolina to France primarily for business purposes. He is away from home from March 5 through March 16. He spends four days vacationing and eight days (including two travel days) conducting business. His airfare is $2,900, his meals amount to $180 per day, and lodging and incidental expenses are $420 per day. He is self-employed. In your computations, round any division to two decimal places and use rounded amounts in subsequent calculations. Chastain's deductible expenses are:Plane and taxi expenses: $_____Lodging and incidental expenses: $_____Meals: $_____

(67% x $2,900) = $1,943 (8 days x $420) = $3,360 (8 days x $180) = $1,440 x 50% cutback for meals = $720

Sabin is an artist and maintains an office (his studio) in his home. His office occupies 8% of the total floor space of his residence. Gross income from his business is $24,000. Expenses of the business (other than home office expenses) are $5,000. Sabin incurs the following home office expenses: Real property taxes on residence: $2,400 Interest expense on residence: $4,000 Operating expenses of residence: $2,200 Depreciation on residence (based on 8% business use): $450. Assuming Sabin uses the "regular method" to compute the office in the home deduction, his deduction is...

Business income $24,000 - business expenses $5,000 = $19,000. Sabin's deduction is computed as follows: Real property taxes on residence: $2,400 x 8%= $192 Interest expense on residence: $4,000 x 8% = $320 Operating expenses of residence: $2,200 x 8% = $176 Depreciation on residence (based on 8% business use): $450 Total deduction: $192 + $320 + $176 + $450 = $1,138.

Sabin is an artist and maintains an office (his studio) in his home. His office occupies 8% (200 square feet) of the total floor space of his residence. Gross income from his business is $24,000. Expenses of the business (other than home office expenses) are $5,000. Sabin incurs the following home office expenses: Real property taxes on residence: $2,400 Interest expense on residence: $4,000 Operating expenses of residence: $2,200 Depreciation on residence (based on 8% business use): $450. Assuming Sabin uses the "simplified method" to compute the office in the home deduction, his deduction is...

Sabin's deduction is based on the square footage. 200 x $5 (statutory rate) = $1,000.

Complete the statements below regarding employee and self-employed status.

Self-employed persons do not have to be included in various fringe benefit programs (e.g., group term life insurance and retirement plans). Because they are not covered by FICA and FUTA, these payroll costs are avoided by the employer.

True/False: Earnings inside a Roth IRA are not taxable, and all qualified distributions from a Roth IRA are tax-free.

True

True/False: From an employer's perspective, it is generally less costly to hire an independent contractor than an employee.

True

Jamie has an undergraduate degree in finance and is employed full-time by a bank. She is taking courses at a local university leading to an MBA degree. a. Jamie wants to know if the full cost of this education deductible. Based on the reasons for the taking courses listed below, identify for Jamie whether the associated costs are "Deductible" or "Nondeductible". 1. It is to maintain or improve existing skills required in her present job.Deductible 2. It is to meet the minimum educational standards for qualification in her existing job.Nondeductible 3. It is to qualify her for a new trade or business.Nondeductible 4. It is to meet the express requirements of her employer or the requirements imposed by law to retain her employment status.Deductible b. What limitations are imposed on the deduction?

a 1. Deductible 2. Nondeductible 3. Nondeductible 4. Nondeductible b. Only the expenses under § 222 are deductible for AGI.

Lara uses the standard mileage method to determine auto expenses. During 2018, she used her car as follows: 9,000 miles for business, 2,000 miles for personal use, 2,500 miles for a move to a new job, 1,000 miles for charitable purposes, and 500 miles for medical visits. Presuming that all the mileage expenses are allowable (i.e., not subject to percentage limitations), what is Lara's deduction for: a) Business? b) Charitable? c) Medical?

a) 9,000*$0.575= $4,905 b) 1,000*$0.14= $140 c) 500*$0.17= $90

For the following scenarios, compute the maximum total deductible contribution to a traditional IRA for 2020. Traditional IRAContribution 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. Juan wishes to contribute as much as possible to his own IRA. b. Abby, age 29, reports 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. c. Leo's employer makes a contribution of $3,500 to Leo's simplified employee pension plan. Leo is single, has earned income of $32,000, and has AGI of $29,000.

a). $12,000 Maximum contribution ($6,000 each) b). $12,000 Maximum contribution ($6,000 each) c). $6,000 Maximum contribution

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). If an amount is zero, enter "0". Click here to access Exhibit 9.1 Limitations for Qualified Tuition Deduction. a. Lily is single and is employed as an architect. During 2020, she spends $4,100 in tuition to attend law school at night. Her modified AGI (MAGI) is $64,000. How much is her deduction for AGI under § 222 (qualified tuition and related expenses)? b. Liam is single and is employed as a pharmacist. During 2020, 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. How much is his deduction for AGI under § 222 (qualified tuition and related expenses)? c. Hailey is married and is employed as a bookkeeper. She spends $5,200 for tuition and $900 for books and supplies in her pursuit of a bachelor's degree in accounting. Her MAGI is $40,000 on the separate return she files. How much is her deduction for AGI under § 222 (qualified tuition and related expenses)? d. John spends $6,500 of his savings on tuition to attend Carmine State College. John is claimed as a dependent by his parents. How much is his deduction for AGI under § 222 (qualified tuition and related expenses)?

a). $4,000 Maximum Deduction b). $0 No Deduction Allowed (MAGI is too high for single) c). $0 No Deduction Allowed (Not available for individuals who file separate returns) d). $0 No Deduction Allowed (Not available for individuals who qualifies as another's dependent)

In the current year, Barlow moved from Chicago to Miami to start a new job, incurring costs of $1,200 to move household goods and $2,500 in temporary living expenses. Barlow was not reimbursed for any of these expenses. What amount should Barlow deduct as an itemized deduction for moving expense? a.$0 b.$1,200 c.$2,500 d.$3,700

a.

Cindy, who is self-employed, maintains an office in her home that comprises 16% (360 square feet) of total floor space. Gross income for her business is $49,400, and her residence expenses are as follows: Real property taxes$5,436 Interest on mortgage9,060 Operating expenses4,530 Depreciation (based on 16% business use)995 If required, round your final answer to the nearest dollar. a. What is Cindy's office in the home deduction based on the regular method? b. What is Cindy's office in the home deduction based on the simplified method?

a. 5436*.16= 869.76 9060*.16= 1449.6 4530*.16= 724.8 +995 4039 b. 1500 (max deduction)

Brenda, a self-employed taxpayer, travels from Chicago to Barcelona (Spain) on business. She is gone 10 days (including 2 days of travel) during which time she spends 5 days conducting business and 3 days sightseeing. Her expenses are $1,500 (airfare), $200 per day (meals), and $400 per night (lodging). Because Brenda stayed with relatives while sightseeing, she only paid for 5 nights of lodging. Compute Brenda's deductions for the following expenses. a. Airfare? b. Meals? c. Lodging?

a. $1,050 (70% × $1,500) b. $700 [($200/2)*7] c. $2,000 [$400*5]

Samantha, who is single and has MAGI of $28,000, was recently employed by an accounting firm. During the year, she spends $2,500 for a CPA exam review course and begins working on a law degree in night school. Her law school expenses were $4,200 for tuition and $450 for books (which are not a requirement for enrollment in the course). a. Assuming no reimbursement, how much can Samantha deduct for the CPA exam review course? b. Assuming no reimbursement, how much can Samantha deduct for the Law school expenses?

a. 0 b. 4000 [Max Deduction Allowed]

On Thursday, Justin flies from Baltimore (where the office for his sole proprietorship is located) 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 is scheduled to return home on Wednesday, but all flights were canceled due to bad weather. As a result, he spends Wednesday watching floor shows at a local casino. Days where travel is attempted/cancelled is counted as a travel day under tax law. Justin is self-employed. 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 about what percentage of Justin's trip would be regarded as business? c. Under either part (a) or (b), how much of Justin's airfare qualifies as a deductible business expense?

a. 100% b. Yes, because this causes Saturday, Sunday, and Monday to be nonbusiness days. c. Under part (a), all of the airfare would be deductible. Under part (b), all of the airfare would be deductible .

Monica, a self-employed taxpayer, 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 in 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?

a. 13 days b. If Monica's trip satisfies the seven-days test or the less-than-25 % test, then her transportation costs do not have to be allocated between business and personal. c. Monica cannot satisfy the seven-days test. Under the less-than-25% test, she could have vacationed for fill in the blank 3 more days assuming that the days did not interfere with the preceding and succeeding days provision.

Indicate whether the following statements apply to an "Accountable plan" or a "Nonaccountable plan". a. The amount of expenses that is deemed substantiated is equal to the lesser of the per diem allowance or the amount of the Federal per diem rate. b. All reimbursements of expenses are reported in full as wages on the employee's Form W-2. c. Employee is required to return any excess reimbursement or allowance.

a. Accountable plan b. Nonaccountable plan c. Accountable plan

For each statement below, select either "Advantage" or "Disadvantage" to classify them with regard to the Simplified Method for determining the office in the home deduction. a. Some actual expenses (homeowners insurance, utilities) are ignored in computing the deduction. b. A standard square foot amount is set, thus simplifying recordkeeping. c. The maximum deduction is $1,500. d. The unused deduction can not be carried over to a future year.

a. Disadvantage b. Advantage c. Disadvantage d. Disadvantage

Mason performs services for Isabella. Based on the factors listed below, select "Employee" or "Independent contractor" to classify Mason's likely employment status. Employee/Independent contractor a. Mason performs services only for Isabella and does not work for anyone else. b. Mason sets his own work schedule. c. Mason reports his job-related expenses on a Schedule C. d. Mason obtained his job skills from Isabella's training program. e. Mason performs the services at Isabella's business location. f. Mason is paid based on time worked rather than on task performed.

a. Employee b. Independent contractor c. Independent contractor d. Employee e. Employee f. Employee

Indicate whether the following statements are "True" or "False" regarding employment-related transportation expenses. a. An employee may deduct unreimbursed employment-related transportation expenses as an itemized deduction for AGI. b. Transportation expenses include only the cost of transporting the employee from one place to another in the course of employment when the employee is not away from home in travel status. c. Usually commuting between home and one's place of employment is a business, deductible expense.

a. False b. True c. False

Indicate whether the following statements are "True" or "False" regarding retirement plans. a. A contribution to a Roth IRA allows the taxpayer a deduction for AGI. b. Self-employed taxpayers can also participate in retirement plans known as Keogh (or H.R. 10) plans. c. Most pension plans allow an exclusion for the contributions the employee makes to the plan.

a. False b. True c. True

Indicate whether the following statements are "True" or "False" regarding the deductibility of education expenses by an employee. a. The expenses were incurred to meet the minimum educational standards for qualification in the taxpayer's existing job. b. The expenses were incurred to meet the express requirements of the employer or the requirements imposed by law to retain his or her employment status. c. The expenses were incurred to maintain or improve existing skills required in the present job.

a. False b. True c. True

Indicate whether the following statements are "True" or "False" regarding business gifts. a. Business gifts are subject to the 50 percent cut-back adjustment. b. Gifts to superiors are not deductible. c. An exception to the annual gift per donee limitation is made for gifts costing $4 or less or promotional materials. d. The annual limitation on business gifts can be circumvented by having the donor's spouse join in the gift.

a. False b. True c. True d. False

Indicate whether the following statements are "True" or "False" regarding travel expenses. a. A one-day business trip is travel status, and meals and lodging for such a trip are deductible. b. The employee must be away from home for a temporary period. c. When a taxpayer has more than one place of business or work, the main one is considered to be the tax home. d. The tax home is the area in which the taxpayer derives his or her source of income.

a. False b. True c. True d. True

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 self-employed 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 prepares 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 x 3 days)*600 Conference registration fee (includes $120 for Family Tax Planning sessions) 620 Car rental 300*Split equally between Dr. and Mrs. Spencer.' a. How much, if any, of these expenses can the Spencers deduct? b. Bret's deductible expenses are:

a. Mrs. Spencer's activities do not constitute a trade or business. Therefore, she can deduct $0 of her expenses. b. $2,700 Airfare (one ticket) $1,000 Lodging $750Meals $300 [(600 *50%)] (MAX is 5 days) Less: 50% limit $150 150 [300-150] Registration fee $500 [620-120] Car rental $300 Total $2,700

Indicate whether each of the following expenses are deductible as education expenses. Select "Yes" or "No", whichever is applicable. a. New clothes b. Books and supplies c. Tuition d. Meals and lodging while in travel status

a. No b. Yes c. Yes d. Yes

In connection with § 222, (deduction for qualified tuition and related expenses) select the appropriate treatment for the situations described below. a. The standard deduction is claimed. b. Tuition when the enrollment at a college does not require the payment of a student activity fee. c. Miscellaneous itemized deductions are not allowed. d. The taxpayer is married and files a separate return. e. A father pays the tuition on behalf of a daughter who does not qualify as his dependent. f. The taxpayer is single and has MAGI of $80,001. g. The Lifetime Learning Credit is claimed. h. The taxpayer, a CPA, pays for tuition and course materials to attend law school.

a. Not Applicable Under § 222 b. Allowed or Limited Under § 222 c. Not Applicable Under § 222 d. No Deduction Allowed Under § 222 e. No Deduction Allowed Under § 222 f. No Deduction Allowed Under § 222 g. No Deduction Allowed Under § 222 h. Allowed or Limited Under § 222

Identify the the following items as "Deductible for AGI", "Deductible from AGI" or "Not deductible". Assume no reimbursement takes place and that employee business expenses are not deductible. Expense ItemDeductible for AGI/Deductible from AGI/Not Deductible a. Tax return preparation fee incurred by an employed plumber b. Safety glasses purchased by an employed pipefitter c. Dues to auto club (e.g., AAA) for taxpayer who uses the automatic mileage method d. Nursing refresher course for taxpayer who retired from nursing five years ago e. Gambling loss not in excess of gambling gain by a self-employed architect f. Contribution to Roth IRA by a self-employed attorney g. Business travel expenses by a statutory employee h. Job hunting expense by an elementary school teacher seeking a position as an elementary school principal i. Cost of bar exam review course taken by a recent law school graduate

a. Not deductible b. Not deductible c. Not deductible d. Not deductible e. Deductible from AGI f. Not deductible g. Deductible for AGI h. Not deductible i. Not deductible

Christine is a full-time fourth-grade teacher 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.] a. What are the income tax consequence of the $1,400, if Christine chooses to itemize her deductions from AGI? b. What are the income tax consequences of the $1,400, if Christine claims the standard deduction?

a. She can claim the educator's deduction in the amount of $250 for AGI and $650 is an employee business expense which is nondeductible. b. She can claim the educator's deduction in the amount of $250 for AGI.

Indicate whether the following statements are "True" or "False" regarding whether the higher education tuition deduction. a. Qualified tuition and related expenses include whatever is required for enrollment at the institution. b. The expense must be employment related. c. The deduction is available for a taxpayer's spouse or anyone who can be claimed as a dependent and is an eligible student. d. The deduction is "for" AGI.

a. True b. False c. True d. True

Indicate whether the following statements are "True" or "False" regarding tax planning ideas related to employee business expenses. a. Being self-employed carries the obvious advantage of a deduction for AGI category of job-related expenses. b. From an employer's perspective, classifying workers as independent contractors rather than as employees avoids payroll taxes and income tax withholdings. c. Taxpayers can choose the actual cost or standard mileage method for transportation expenses. However, once a method is chosen, a change later is not allowed.

a. True b. True c. False

Indicate whether the following statements are "True" or "False" regarding the office in the home deduction. a. Office in the home expenses are deductible if the residence is used exclusively on a regular basis as a principal place of business for any trade or business of the taxpayer. b. The home office may be where the taxpayer meets clients, patients, or customers. c. The exclusive use requirement means that part of the home must be used solely for business purposes.

a. True b. True c. True

Select "Yes" or "No" to indicate whether the following statements are factors which indicate a common law employee-employer relationship. a. The employer makes training available to provide needed job skills. b. The employer pays for services based on task performed rather than the time. c. The employer furnishes tools or equipment and a place to work. d. The employer allows participation in various workplace fringe benefits.

a. Yes b. No c. Yes d. Yes

If employee expenses are reimbursed under an ____________, then neither the reimbursement nor the expense is reported by the employee.

Accountable plan

In 2020, Britt drove her automobile 16,200 miles for business. She incurred $900 in gas expenses and $235 in tolls associated with the business mileage.

Assuming Britt uses the standard mileage method, her deduction is $9550 [(16,200x$0.575)+$235]=$9,550

Are unreimbursed employee expenses deductible or nondeductible?

Nondeductible

In each of the following situations, indicate whether the 50% reduction for meals applies. Yes / No a. Each year, the employer awards its top salesperson an all-expense-paid trip to Jamaica. b. The employer has a cafeteria for its employees, where meals are furnished at cost. The value of the meals are not included in the compensation of employees. c. The employer sponsors an annual Labor Day picnic for its employees. d. Every Christmas, the employer gives each employee a fruitcake. e. The taxpayer gives business gifts to her clients at Christmas.

a. No b. Yes c. No d. No e. No

Indicate whether the following statements are "True" or "False" regarding restrictions on travel expenses. a. For travel expenses to be deductible, a convention must be directly related to the taxpayer's trade or business. b. Travel as a form of education is deductible. c. Generally, the accompaniment by the spouse or dependent must serve a bona fide business purpose, and the expenses must be otherwise deductible.

a. True b. False c. True

Bob and Nancy are married and file a joint return in 2020. They are both under age 50 and employed, with wages of $50,000 each. Their total AGI is $110,000. Neither of them is an active participant in a qualified plan. What is the maximum traditional IRA deduction they can take for the current year? a.$0 b.$6,000 c.$8,400 d.$12,000

d.

Ryan is 39 years old and works as a real estate agent. Ryan's marginal tax rate is 24%. Ryan has a traditional IRA with a current balance of $80,000. The IRA consists of $60,000 of contributions that Ryan made and deducted on his tax return and $20,000 of account earnings. In the current year, Ryan receives a distribution of the entire $80,000. He contributes $60,000 of the distribution to a Roth IRA and keeps the remaining $20,000 for personal expenditures. What is Ryan's total income tax and penalty on the transactions? a.$0 income tax, $0 penalty b.$20,000 income tax, $8,000 penalty c.$5,000 income tax, $2,000 penalty d.$19,200 income tax, $2,000 penalty

d.

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. How much may Stork deduct for this event?

$650 $1,300 * .50 = $650 Deductible

In 2020, Robert takes four key clients and their spouses out to dinner. Business discussions occurred over dinner. Expenses were $1,155 (drinks and dinner) and $231 (tips to servers). If Robert is self-employed, how much can he deduct for this event?

$693 ($1,155+$231)/2 [50% of expense can be deducted as long as it is food or drink related]

In 2020, the CEO of Crimson, Inc., entertains 10 clients at a skybox in Memorial Stadium for a single athletic event during the year. Substantive business discussions occurred at various times during the event. The box cost $9,350 per event and seats 12 people. (The cost of a regular, nonluxury box seat at Memorial ranges from $95 to $190.) Refreshments served during the event cost $1,870 (and were separately itemized on the bill Crimson received). How much of these costs may Crimson deduct?

$935 ($1,870/2) [50% of expense can be deducted as long as it is food or drink related]

Joey, age 49, who is single, is not covered by another qualified plan and earns $126,000 (AGI is $126,000) in 2020. How much can he contribute to a traditional IRA or to a Roth IRA in 2020?

In 2020, he can contribute $6000 to a traditional IRA or $5200 to a Roth IRA.

In 2020, Ensley drove her automobile 28,500 miles. She incurred the following expenses during the year related to the automobile: Gas and oil, lubrication: $1,800 Insurance: $980 Repairs: $360 Licenses and registration fees: $50 Business parking and tolls: $170 She uses the automobile 80% for business. Based on the data, Ensley's automobile deduction under the actual cost method is...

$2,722 $1800+$980+$360+$50 = $3190 [(3190x80%)+$170]= $2722

Andrew sends Godiva chocolates to 10 of his key clients at Christmas. The chocolates cost $50 a box not including $4 for gift wrapping and shipping. How much can Andrew deduct?

$290 [($50/2)*10] + ($4*10) [50% of expense can be deducted as long as it is food or drink related]

Gold corp, which operates a department store, sells a television to its employee Howard for $370. The regular customer price is $500, and the gross profit rate is 20%. What is the amount of gross income recognized by Howard?

$30 (370-(500 x .20))

Deductions for AGI

Expenses connected with a trade or business

In 2018, Emma purchased an automobile, which she uses for both business and personal purposes. Although Emma does not keep records of her operating expenses (e.g., gas, oil, repairs), she can prove the percentage of business use and the miles driven each year. In March 2020, Emma seeks your advice as to what income tax benefit, if any, she can derive from the use of her automobile. What would you suggest?

It appears that Emma has never claimed a deduction for the business use of the auto. Due to an absence of records pertaining to the cost of operating the vehicle, Emma cannot use the actual cost method of determining the deduction. Therefore, Emma should use the automatic mileage method.