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Exam 11: Individuals As Employees and Proprietors

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Question 31

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Dana,age 31 and unmarried,is an active participant in a qualified retirement plan.Her AGI is $120,000.What amount,if any,may Dana contribute to a Roth IRA in 2015?

A) $0
B) $3,225
C) $4,033
D) $5,500
E) None of the above

F) B) and D)
G) A) and C)

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Question 32

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Frank,a recently retired FBI agent,pays job search expenses to obtain a position with a city police department.Frank's job search expenses do qualify as deductions.

A) True
B) False

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Question 33

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Roger is in the 35% marginal tax bracket.Roger's employer has created a flexible spending account for medical and dental expenses that are not covered by the company's health insurance plan.Roger had his salary reduced by $1,200 during the year for contributions to the flexible spending plan.However,Roger incurred only $1,100 in actual expenses for which he was reimbursed.Under the plan,he must forfeit the $100 unused amount.His after-tax cost of overfunding the plan is $65.

In terms of meeting the distance test for purposes of deducting moving expenses,which of the following statements is correct?

In choosing between the actual expense method and the automatic mileage method,a taxpayer should consider the cost of insurance on the automobile.

Concerning the deduction for moving expenses,what circumstances,if any,will excuse a taxpayer from meeting the time test of 39 or 78 weeks?

Sammy,age 31,is unmarried and is not an active participant in a qualified retirement plan.His modified AGI is $55,000 in 2015.The maximum amount that Sammy can deduct for a contribution to a traditional IRA is:

Joyce,age 40,and Sam,age 42,who have been married for seven years,are both active participants in qualified retirement plans.Their total AGI for 2015 is $120,000.Each is employed and earns a salary of $65,000.What are their combined deductible contributions to traditional IRAs?

One indicia of independent contractor (rather than employee)status is when the individual performing the services is paid based on time spent (rather than on tasks performed).

The work-related expenses of an independent contractor will be subject to the 2%-of-AGI floor.

Distributions from a Roth IRA that are subject to taxation are treated first as from earnings and last as from contributions.

A worker may prefer to be treated as an independent contractor (rather than an employee) for which of the following reasons:

Tired of renting,Dr.Smith buys the academic robes she will wear at her college's graduation procession.The cost of this attire does not qualify as a uniform expense.

Under the actual cost method,which,if any,of the following expenses will not be allowed?

Ethan,a bachelor with no immediate family,uses the Pine Shadows Country Club exclusively for his business entertaining.All of Ethan's annual dues for his club membership are deductible.

When using the automatic mileage method,which,if any,of the following expenses also can be claimed?

A taxpayer who lives and works in Kansas City is sent to Chicago on an eight-day business trip.While in Chicago,taxpayer uses the hotel valet service to have some laundry done.The valet charge is a nondeductible personal travel expense.

Zork Corporation was very profitable and had accumulated excess cash.The company decided to repurchase some of its bonds that had been issued for $1,000,000.Because of an increase in market interest rates,Zork was able to retire the bonds for $900,000.The company is not required to recognize $100,000 of income from the discharge of its indebtedness but must reduce the basis in its assets.

An individual,age 40,who is not subject to the phase-out provision may contribute a nondeductible amount to a Roth IRA up to $5,500 per year in 2015.

The CEO of Cirtronics Inc. ,discovered that the company's competitor had adopted a cafeteria plan for its employees.The CEO is concerned about retaining his talented employees and would like you to provide a brief explanation as to why a cafeteria plan may be attractive to the company's employees.