What's New

Standard mileage rate
1. For 2010, the standard mileage rate for the cost of operating your car for business use is 50 cents per mile.

A. True
B. False

Depreciation limits on cars, trucks, and vans

2. For 2010, the first-year limit on the total section 179 deduction, special depreciation allowance, and depreciation deduction for most vehicles remains $11,060 ($3,060 if you elect not to claim the special depreciation allowance).

A.True
B. False

Introduction

3.  An expense must be required to be considered necessary and therefore a deductible expense.

A.  True

B.  False

Users of employer-provided vehicles

4. If an employer-provided vehicle was available for your use that qualifies as a working condition fringe benefit, the employer must be include the value of the use in your income as pay.

A. True
B. False

5.  A working condition fringe benefit is any property or service provided to you by your employer for which you could deduct the cost as an employee business expense if you had paid for it.

A.  True

B.  False

Volunteers

6.  If you perform services as a volunteer worker for a qualified charity, you may be able to deduct some of your costs as a charitable contribution.

A.  True

B.  False

Travel
Traveling away from home
7. Rudy traveled 150 miles from his regular office to another city to repair a customer's computer system. The repair took longer than a normal work day. Rudy took a 1 hour break for lunch and another 1 hour dinner break. After completing the repair, he returned to his regular office at 10 pm that night. This activity qualifies as "traveling away from home".

A. True
B. False

8. Barney left the general area of his tax home at 8 am to make a customer delivery and repair. The repair did not end until 9 pm. Too exhausted to return home immediately, Barney checked into a motel to obtain required rest for travel. After 1 hour of rest, Barney left and returned home at 11:59 pm that same evening. This activity qualifies as "traveling away from home".

A) True
B) False

Tax Home
9. Maxwell maintains his family home in Minneapolis but his regular place of business is in California. Maxwell's "tax home" is California.

A. True
B. False

Travel to family home

10. Martin's regular place of business is both in Detroit and Los Angeles. Martin's family is in Detroit. Martin spends more time and earns more money in Los Angeles. Martin may deduct meals and lodging expense while in Los Angeles.

A. True
B. False

Temporary assignment or job
11. Gina receives an assignment in Los Angeles. Gina's family lives in Minneapolis and Gina works in Minneapolis on a regular basis. The assignment is on an indefinite basis and expected to last more than one year. If the assignment ends up lasting less than one year, Gina may deduct travel expenses while in Los Angeles.

A. True
B. False

Going home on days off
12. Ryan returns home from a temporary assignment on days off. If Ryan keeps his hotel room at his temporary location during his visit home, Ryan may deduct the cost of his hotel room.

A. True
B. False

What Travel Expenses Are Deductible?
Travel expenses for another individual
13. Dr. Transplant traveled away from his home to represent his University employer at a convention. Dr. Transplant's wife came along to assist him in coordinating and hosting the event. Dr. Transplant's wife is not an employee or a business associate. Expenses of Dr. Transplant's wife are not deductible.

A. True
B. False

Standard Meal Allowance
14. There is no optional standard lodging amount similar to the standard meal allowance.

A. True
B. False

Trip Primarily for Business
15. Philip took a business trip to Denver. After his business meetings he stayed two extra days to ski. The trip would have lasted 5 days and cost $3,000 without the ski side trip. Instead, the trip lasted 7 days and cost $5,000 for travel, meals, lodging and other travel expenses. Philip may deduct which of the following amounts before taking into account the 50% limit on meals:

A. $5,000 multiplied by 5/7
B. $5,000
C. $3,000 multiplied by 5/7
D. $3,000 less 2/7 of the plane tickets
E. $3,000

Primarily for Personal Reasons
16. Lewis took a trip to Hawaii primarily for personal reasons. Lewis also took the trip to sit for an examination required to obtain a business license for his company in Hawaii. Lewis may not deduct any portion of his plane ticket.

A. True
B. False

Travel Entirely for Busniess or Considered Entirely for Business
17. Simon traveled from his home in Los Angeles to Toronto primarily for business. Even if Simon did not spend his entire time in Toronto on business, the trip is considered entirely for business if:

A. trip lasted less than 7 days
B. reimbursed as an employee and neither a managing executive or relative of employer
C. less than 25% time spent on non-business activities
D. personal vacation not a major consideration
E. All of the above

Travel Primarily for Business
18. Mr. Moore traveled from Columbus to London and was gone for 12 days. Two days were spent on transportation to and from. Seven of the days were spent attending business meetings and three days spent on personal time. How much of the $1,000 round trip plane fare can Mr. Moore deduct?

A. $1,000
B. $1,000 x 7/12
C. $1,000 x 9/12
D. $1,000 x 7/10
E. -0-

Certain weekends and holidays
19. Morgan traveled to Bermuda for business meetings that ended on a Friday. The meetings resumed the following Monday. Morgan spent the weekend vacationing. Saturday and Sunday are considered business days.

A. True
B. False

Nonbusiness activity on the way to or from your business destination
20. Harvey left his home in Minneapolis on a trip primarily for business to attend a meeting in Frankfurt. Harvey does not meet any of the exceptions to treat the entire trip as business. After the meeting in Frankfurt, Harvey flew to Dublin for pleasure and returned to Minneapolis. Eight days were business and nine days were personal. Round trip plane fare from Minneapolis to Frankfurt was $2,500 and round trip plane fare from Minneapolis to Dublin was $1,100. Harvey's total allowable travel expense to be added to allowable expenses at the business destination is:

A. $2,500
B. $2,500 x 8/17
C. ($1,100 + $2,500) x 8/17
D. (8/17 x $1,100) + ($2,500 - $1,100)
E. None of the above

Nonbusiness activity at, near, or beyond business destination
21. Jones traveled from his home in New York to London primarily for a business meeting. Jones does not meet any of the exceptions to treat the entire trip for business. After the business meeting in London, Jones flew to Athens for pleasure and returned to New York. The trip was for 3 business and 13 nonbusiness days. Round trip air fare from New York to London was $950 and from New York to Egypt was $1,250. Jones may deduct air fare of:

A. 3/16 x $950
B. $950
C. ($1,250 + $950) x 3/16
D. (3/16 x $950) + ($1,250 - $950)
E. None of the above

Travel primarily for Personal Reasons
22. Travel outside the US primarily for non-business activity is totally nondeductible, even if some time was spent attending a business activity.

A. True
B. False

Luxury water travel
23. If your expenses for luxury water travel do not separately state amounts for meals and entertainment, you must allocate a portion subject to the 50% limit.

A. True
B. False

50% Limit
24. Generally, only 50% of unreimbursed entertainment expenses are deductible.

A.True
B. False

25. All of the following expenses when related to a business meal or entertainment activity are subject to the 50% deduction limit except:

A. Tips
B. Taxes

C. Parking
D. Transportation
E. Admission

26. Hill purchased 2 tickets to the Super Bowl from a scalper for $1,200 and gave them to clients. The tickets had a face value of $65 each ($130 total). Assuming the expense is deductible, the amount Hill can deduct is:

A. $1,200
B. $600
C. $130
D. $65

Employer's reimbursed expenses
27. Newman is reimbursed by his employer for meals and entertainment expenses under an accountable plan that does not treat such payments as wages. Newman is not subject to the 50% limit for these reimbursed expenses.

A. True
B. False

Self-employed
28. Martin is a self employed consultant. Martin provides adequate records of his meals and entertainment expenses related to services performed for his clients and the client provides reimbursement. If client can deduct the expenses, client is subject to the 50% deduction limit.

A. True
B. False

29. Randolf purchased tickets to a qualified charity dinner and tournament. The 50% limit on entertainment expenses does not apply.

A. True
B. False

30. Jeffries paid $200 to rent a 12 seat sky box for a 2 day sporting event. The cost of regular box seats for the event is $40 per seat. The allowable amount (subject to the 50% limit) is:

A. $4,200

B. $960
C. $2,100
D. $480

Entertainment
31. Meyers Company invites its customers to a 2 day fishing event held at Grand Marais Lodge. Meyers may deduct the cost to rent the lodge.

A. True
B. False

E. None of the above

Gift or entertainment
32. Brady gives a business customer tickets to the basketball game but does not accompany the customer to the game. The tickets are deductible as:

A. Entertainment expense
B. Gift expense

C. Whichever is to Brady's advantage
D. Travel expense

Gifts
33. Mr. Jones and his spouse Mrs. Jones operate separate consulting businesses. Both give gifts to the same vendor with independent business connections. The maximum deduction Mr. Jones can take for this gift if Mrs. Jones deducts $25 for her separate business is:

A. $25
B. $0
C. cost of the gift

D. cost of the gift less $25

Transportation
34. When home is not the principal place of business, local transportation cost can be deductible for all of the following travel except:

A. Home to temporary work place
B. Regular job to second job
C. Home to regular or main job
D. Regular job to temporary location

Commuting Expenses
35. Commuting expenses are deductible if work is done during the commuting trip.

A. True
B. False

Car pools
36. Mary commutes to her regular place of work by participating in a non-profit car pool. When Mary drives, she receives payments from passengers. Mary must include these payments in her income.

A. True
B. False

Office in the home
37. Bart has an office in his home that qualifies as a principal place of business. Bart has a second job in a different trade or business. Bart can deduct transportation costs from his home to his second job.

A. True
B. False

38. Lisa is a junior auditor that works out of client offices with no regular office or home office. Lisa is required to travel locally to a 1 week seminar and return home each day. Lisa can deduct the cost of this travel.

A. True
B. False

Standard Mileage Rate
39. You can use the standard mileage rate deduction only for a car that you own.

A. True
B. False

Two or more cars
40. Stephanie owns two separate vehicles that she uses in her business. The vehicles are never used at the same time. Stephanie may use the standard mileage rate for the vehicles.

A. True
B. False

Personal Property Taxes
41. State and local personal property taxes on motor vehicles are never deductible if you do not use the vehicle for business.

A. True
B. False

Limit on total section 179 and depreciation deductions
42. Generally, the total amount of section 179 and depreciation deductions that you can claim for a qualified car that you placed in service in 2010, cannot be more than $11,060.

A. True
B. False

Depreciation Deduction

More-than-50%-use test
43. JoAnn purchased a van to use in her business and immediately placed it into service. Her business use is 45%. JoAnn may take a section 179 deduction in the amount of 45% of the section 179 limit.

A. True
B. False

Business Use Changes
44. Margeret use her car for more than 50% in a qualified business use last year, the same year it was placed into service. This year her business use dropped to 40%. If Margeret began using the MACRS depreciation system , she may continue it for the current year.

A. True
B. False

Depreciation Methods
45. MACRS depreciation methods include:

A. 200% declining balance method
B. 150% declining balance method
C. Straight line
D. All of the above

MACRS depreciation chart
46. When filing on a fiscal year basis, the depreciation tables in Publication 946 must be used rather than the MACRS depreciation chart.

A. True
B. False

Maximum Depreciation Deduction for Cars
47. The maximum depreciation limit for a car placed in service in 2010 for the first year is:

A. $11,160
B. $11,060
C. $4,800
D. $4,900

E.  none of the above

Deductions in years after the recovery period
How to treat unrecovered basis
48. A depreciation deduction can be claimed for business use after the recovery period until the full basis in the car is recovered.

A. True
B. False

Disposition of a Car

Trade-in

49.  When you trade in an old car for a new one, the transaction is considered a like-kind exchange and generally no gain or loss is recognized.

A.  True

B.  False

Record Keeping
What Are Adequate Records?
50. When business travel expense, excluding lodging is less than $75, documentary evidence, such as receipts, canceled checks or bills are not needed:

A. True
B. False

How To Prove Certain Business Expenses
51. Transportation costs require records that show proof of the business relationship.

A. True
B. False

Proving business purpose
52. A written explanation of business purpose is not required for salesman calling on established customers.

A. True
B. False

How Long To Keep Records and Receipts
53. The amount of time records must generally be kept to support deductions is:

A. 1 year from the date of the expense
B. 3 years from the date of the expense
C. 3 years from the date returned is deemed filed
D. 5 years from the date returned is deemed filed

Reimbursed for expenses
54. Employees reimbursed under an accountable plan do not have to keep duplicate records.

A. True
B. False

How To Report
Where To Report
55. Persons who are exclusively self-employed report travel, entertainment, gift and car expenses on all of the following forms except:

A. Schedule C
B. Schedule C-EZ
C. Form 4562
D. Form 2106

Employees
56. Form 2106-EZ may be used by employees not reimbursed for expenses and who use the standard mileage rate for car expenses.

A. True
B. False

Statutory Employees
57. Statutory employees may use Form 2106 or Form 2106-EZ to report related expenses.

A. True
B. False

Reimbursements
Accountable Plans
58. To qualify as an accountable plan, all of the following rules for reimbursement are required except:

A. Expenses must have a business connection
B. Expenses must be accounted for to the employer within a reasonable time
C. Reimbursement must be included as pay on employees W-2
D. Any excess reimbursement must be returned to the employer within a reasonable time.

Per Diem and Car Allowances
59. Requirements to use the per diem amount to prove the amount of expenses by an employee include all of the following except:

A. Employer limits travel expenses to ordinary and necessary for business
B. Allowance is similar in form and not more than the federal per diem
C. Employee must be a relative or owner of employer
D. Time, place and business purpose of travel are proved

Prorating the standard meal allowance on partial days of travel
60. Prorating standard meal allowance on partial days of travel can be based upon a 9 am to 5 pm work day, even though federal employee prorating must be based upon a 24 hour day.

A. True
B. False

Allowance LESS than or EQUAL to the federal rate
61. Harry's employer reimbursed him less than the federal rate for mileage under an accountable plan. Harry's actual costs were higher than the reimbursement. Harry can complete Form 2106 and deduct the excess amount on Schedule A (Form 1040).

A. True
B. False

Per diem allowance MORE than federal rate
62. Jackson traveled to Denver for 5 days and received $250 (5 X $50) from his employer for meals and incidental expenses under an accountable plan. If the federal rate for Denver is $34 per day, Jackson's employer must report how much of the payment as wages on Jackson's W-2:

A. -$0-
B. $250
C. $170
D. $80

Rules for Independent Contractors and Clients
Required Records for Clients or Customers
63. If a business reimburses independent contractors for entertainment expenses incurred on its behalf and the contractor adequately accounts to the business for such expenses, the business is required to keep records to prove the reimbursements.

A. True
B. False

Completing Forms 2106 and 2106-EZ
64. Self-employed persons are to use Form 2106 or 2106-EZ to figure travel, meal and entertainment expenses.

A. True
B. False

Limit on miscellaneous itemized deductions
65. Employee business expenses figured on Form 2106 or Form 2106-EZ are generally subject to a 2%-of -adjusted-gross-income limit.

A. True
B. False

Expenses of Certain Performing Artists
66. A performing artist may qualify to deduct employee business expenses as an adjustment to gross income, rather than a miscellaneous itemized deduction.

A. True
B. False

Impairment-Related Work Expenses of Disabled Employees
67. Joe is blind and hires a reader to assist him at work. Joe's expenses for the reader are subject to the 2%-of-adjusted-gross-income limit for employee business expenses.

A. True
B. False

Course Evaluation
68. Indicate your professional designation.

A. CPA
B. Public Accountant
C. Enrolled Agent
D. CFP
E. Other

69. Indicate years experience in the course subject matter.

A. Less than 5
B. 5 to 10
C. 11 to 15
D. 16 to 20
E. 21 and over

70. Did the program meet your learning objectives?

A. Yes
B. No

71. Did the program materials contribute to the achievement of your learning objectives?

A. Yes
B. No

72. Did you find the program content relevant and timely?

A. Yes
B. No

73. Was the difficulty of the questions:

A. About right
B. Too easy
C. Too difficult

74. Was the list of prerequisites (if any) for the program appropriate?

A. Yes
B. No

75.  Do you plan on taking additional courses from CPE Accounting & Tax Institute in the next six months?

A.  Yes

B.  No

76.  Would you recommend these courses to others?

A.  Yes

B.  No