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Chapter 09: Deductions: Employee and Self-Employed-Related Expenses
1. 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).
a. True
b. False
ANSWER: False
RATIONALE: What is described is a criterion for employee classification.
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: IITX.SWFT.LO: 9-01 - LO: 9-01
NATIONAL STANDARDS: United States - BUSPORG: Comprehension - BUSPORG:Comprehension
STATE STANDARDS: United States - AK - AICPA: FN-Measurement -
AICPA: FN-Measurement
KEYWORDS: Bloom's: Comprehension
OTHER: Time: 2 min.
2. In some cases it may be appropriate for a taxpayer to report work-related expenses by using both Form 2106 and
Schedule C.
a. True
b. False
ANSWER: True
RATIONALE: A taxpayer with two jobs may be both an employee (Form 2106) and self-employed
(Schedule C).
POINTS: 1
DIFFICULTY: Easy
STATE STANDARDS: United States - AK - AICPA: FN-Reporting
OTHER: Time: 2 min.
3. The IRS will issue advanced rulings as to whether a worker’s status is that of an employee or an independent contractor.
a. True
b. False
ANSWER: True
RATIONALE: A ruling from the IRS can be obtained by filing Form SS–8.
POINTS: 1
DIFFICULTY: Easy
KEYWORDS: Bloom's: Knowledge
OTHER: Time: 2 min.
4. Jake performs services for Maude. If Maude provides a helper and tools, this is indicative of independent contractor
(rather than employee) status.
Copyright Cengage Learning. Powered by Cognero. Page 1
a. True
b. False
ANSWER: False
RATIONALE: Because Jake does not provide his own helper and tools, this indicates that he is probably
not an independent contractor.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
5. A statutory employee is not a common law employee but is subject to Social Security tax.
a. True
b. False
ANSWER: True
RATIONALE: A statutory employee is subject to Social Security tax.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
6. For tax purposes, a statutory employee is treated the same as a common law employee.
a. True
b. False
ANSWER: False
RATIONALE: Among other differences, statutory employees claim their expenses as deductions for AGI on
Schedule C.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
7. If an individual is subject to the direction or control of another only to the extent of the end result but not as to the
means of accomplishment, an employer-employee relationship does not exist.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
8. The work-related expenses of an independent contractor will be subject to the 2%-of-AGI floor.
a. True
b. False
ANSWER: False
RATIONALE: The expenses are deductions for AGI. Only certain itemized deductions are subject to the 2%
limitation.
POINTS: 1
DIFFICULTY: Easy
IITX.SWFT.LO: 9-11 - LO: 9-11
OTHER: Time: 2 min.
9. After she finishes working at her main job, Ann returns home, has dinner, then drives to her second job. Ann may
deduct the mileage between her first and second job.
a. True
b. False
ANSWER: True
RATIONALE: The deduction is based on the mileage between the first and the second job.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
10. A taxpayer who maintains an office in the home to conduct his only business will not have nondeductible commuting
expense.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
11. After the automatic mileage rate has been set by the IRS for a year, it cannot later be changed by the IRS.
a. True
b. False
ANSWER: False
RATIONALE: In the past and because of rising fuel costs, the IRS has raised the rates in midyear.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
12. In choosing between the actual expense method and the automatic mileage method, a taxpayer should consider the
cost of insurance on the automobile.
a. True
b. False
ANSWER: True
RATIONALE: If taxpayer lives and works in a metropolitan area and a significant commute is involved, car
insurance premiums could be quite costly.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
13. A taxpayer who uses the automatic mileage method to compute auto expenses can also deduct the business portion of
tolls and parking.
a. True
b. False
ANSWER: True
RATIONALE: Such costs are deductible under both methods.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
14. A deduction for parking and other traffic violations incurred during business use of the automobile is allowed under
the actual cost method but not the automatic mileage method.
a. True
b. False
ANSWER: False
RATIONALE: No such deduction is allowed under either method.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
15. A taxpayer who uses the automatic mileage method for the business use of an automobile can change to the actual cost
method in a later year.
a. True
b. False
ANSWER: True
RATIONALE: An adjustment to the basis of the automobile will have to be made for the depreciation
deemed taken under the automatic mileage method.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
16. Once the actual cost method is used, a taxpayer cannot change to the automatic mileage method in a later year.
a. True
b. False
ANSWER: False
RATIONALE: A change is permitted if MACRS (statutory percentage method) depreciation has not been
used or the § 179 election to expense was not made.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
17. For tax purposes, “travel” is a broader classification than “transportation.”

a. True
b. False
ANSWER: True
RATIONALE: Travel expenses include transportation expenses and meals and lodging while away from
home in the pursuit of a trade or business.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
18. Amy lives and works in St. Louis. In the morning she flies to Boston, has a three-hour business meeting, and returns to
St. Louis that evening. For tax purposes, Amy was away from home.
a. True
b. False
ANSWER: False
RATIONALE: The absence must be a period substantially longer than an ordinary day’s work and must
require rest.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
19. 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.
a. True
b. False
ANSWER: True
RATIONALE: This could be the case of a long-haul truck driver where his tax home goes with him.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
20. Marvin lives with his family in Alabama. He has two jobs: one in Alabama and one in North Carolina. Marvin’s tax
home is where he lives (Alabama).
a. True
b. False
ANSWER: False
RATIONALE: Marvin’s tax home is where his principal job is located. This is determined by considering
numerous factors, among which are the level of income earned and the amount of time
spent. Thus, it is incorrect to resolve the tax home issue without more facts.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
21. 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.
a. True
b. False
ANSWER: False
RATIONALE: Valet service is part of the travel expense deduction.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
22. The tax law specifically provides that a taxpayer cannot be temporarily away from home for any period of
employment that exceeds one year.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy

OTHER: Time: 2 min.
23. A taxpayer who lives and works in Tulsa travels to Buffalo for five days. If three days are spent on business and two
days are spent on visiting relatives, only 60% of the airfare is deductible.
a. True
b. False
ANSWER: False
RATIONALE: For domestic mixed travel (i.e., both business and personal), no allocation of transportation is
required.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
24. 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.
a. True
b. False
ANSWER: True
RATIONALE: Bob meets the seven-days-or-less exception.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
25. Eileen lives and works in Mobile. She travels to Rome for an eight-day business meeting, after which she spends two
days touring Italy. All of Eileen’s airfare is deductible.
a. True
b. False
ANSWER: True
RATIONALE: Eileen meets the less-than-25%-personal-time exception.
POINTS: 1
DIFFICULTY: Easy

OTHER: Time: 2 min.
26. Liam just graduated from college. Because it is his first job, the cost of moving his personal belongings from his
parents’ home to the job site does not qualify for the moving expense deduction.
a. True
b. False
ANSWER: False
RATIONALE: There is no prohibition against claiming moving expenses if the first job is involved.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
27. Sick of her 65 mile daily commute, Edna purchases a condo that is only four miles from her job. Edna’s moving
expenses to her new condo are not allowed and cannot be claimed by her as a deduction.
a. True
b. False
ANSWER: True
RATIONALE: Edna does not have qualified moving expenses since she did not change job locations.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
28. In November 2017, Katie incurs unreimbursed moving expenses to accept a new job. Katie cannot deduct any of these
expenses when she timely files her 2017 income tax return since she has not yet satisfied the 39-week time test.
a. True
b. False
ANSWER: False
RATIONALE: The deduction can be claimed even if the time test has not yet been met.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
29. In May 2017, after 11 months on a new job, Ken is fired after he assaults a customer. Ken must include in his gross
income for 2017 any deduction for moving expenses he may have claimed on his 2016 tax return.
a. True
b. False
ANSWER: False
RATIONALE: Since Ken worked for 11 months, he has already satisfied the 39-week time test.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
30. A moving expense deduction is allowed even if at the time of the move the taxpayer did not have a job at the new
location.
a. True
b. False
ANSWER: True
RATIONALE: As long as the taxpayer ultimately satisfies the time test, it does not matter when the work
assignment is obtained.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
31. Kelly, an unemployed architect, moves from Boston to Phoenix to accept a job as a chef at a restaurant. Kelly’s
moving expenses are not deductible because her new job is in a different trade or business.
a. True
b. False
ANSWER: False
RATIONALE: For moving expenses to be deductible, a taxpayer need not remain in the same trade or
business.
POINTS: 1
DIFFICULTY: Easy

OTHER: Time: 2 min.
32. Alexis (a CPA) sold her public accounting practice in Des Moines and accepted a job with the Seattle office of a
national accounting firm. Her moving expenses are not deductible because she has changed employment status (i.e., went
from self-employed to employee).
a. True
b. False
ANSWER: False
RATIONALE: The change does not matter for purposes of the moving expense deduction.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
33. Qualified moving expenses include the cost of lodging but not meals during the move.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
34. Qualified moving expenses of an employee that are not reimbursed are a deduction for AGI.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
35. At age 65, Camilla retires from her job in Boston and moves to Florida. As a retiree, she is not subject to the time test
in deducting her moving expenses.
a. True
b. False
ANSWER: False
RATIONALE: Camilla is not an expatriate and does not come under that exception.
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES:IITX.SWFT.LO: 9-04 - LO: 9-04
OTHER: Time: 2 min.
36. After completing an overseas assignment in Oslo (Norway), Daniel retires from Pelican Corporation and moves to a
retirement community in Key West (Florida). Daniel’s moving expenses from Oslo to Key West are deductible as they are
exempt from the time test.
a. True
b. False
ANSWER: True
RATIONALE: A special exception for retiring expatriates applies.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
37. An education expense deduction may be allowed even if the education results in a promotion or pay raise for the
employee.
a. True
b. False
ANSWER: True
RATIONALE: There is no prohibition as to this result in deducting education expenses.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
38. 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.
a. True
b. False
ANSWER: False
RATIONALE: A deduction might be available under the § 222 qualified tuition for higher education
provision. Here, it does not matter that a new skill is being acquired.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
39. Under the right circumstances, a taxpayer’s meals and lodging expense can qualify as a deductible education expense.
a. True
b. False
ANSWER: True
RATIONALE: If the education involves the taxpayer being away from home (i.e., in travel status).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
40. There is no cutback adjustment for meals and entertainment as to employees who are subject to regulation by the U.S.
Department of Transportation.
a. True
b. False
ANSWER: False
RATIONALE: The cutback adjustment applies, but at a reduced rate.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
41. Mallard Corporation pays for a trip to Aruba for its two top salespersons. This expense is subject to the cutback
adjustment.
a. True
b. False
ANSWER: False
RATIONALE: The cost of the trips to Aruba are additional compensation to the employees involved.
Consequently, they are not subject to the cutback adjustment and are fully deductible by
Mallard Corporation. They are also taxed as income to the employees.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
42. Flamingo Corporation furnishes meals at cost to its employees by means of a cafeteria it maintains. The cost of
operating the cafeteria is not subject to the cutback adjustment.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
43. A taxpayer takes six clients to an NBA playoff game. If all of the tickets (list price of $120 each) are purchased on the
Internet for $1,800 ($300 each), only $60 ($120 × 50% cutback adjustment) per ticket is deductible.
a. True
b. False
ANSWER: True
RATIONALE: $60 ($120 × 50% cutback adjustment) per ticket is deductible.
POINTS: 1
DIFFICULTY: Easy
KEYWORDS: Bloom's: Application
OTHER: Time: 5 min.
44. 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.
a. True
b. False
ANSWER: False
RATIONALE: Dues to country clubs are not deductible.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
45. Jackson gives his supervisor and her husband each a $30 box of chocolates at Christmas. Jackson may claim only $25
as a deduction.
a. True
b. False
ANSWER: False
RATIONALE: As gifts to supervisors and spouses are not deductible, Jackson has no deduction.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
46. On their birthdays, Lily sends gift certificates (each valued at $25) to Caden (a key client) and to each of Caden’s two
minor children. Lily can deduct only $25 as to these gifts.
a. True
b. False
ANSWER: True
RATIONALE: These gifts will be aggregated in applying the $25 limit.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
47. Travis holds rights to a skybox (containing 10 seats) at Memorial Stadium which he uses to entertain key clients. At
one sporting event, he took only six clients since three were ill. Even so, Travis may still deduct the appropriate cost of all
ten seats.
a. True
b. False
ANSWER: True
RATIONALE:
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
48. In the case of an office in the home deduction, the exclusive business use test does not apply when the home is used as
a daycare center.
a. True
b. False
ANSWER: True
RATIONALE: Mixed use (i.e., business and personal) of the home is permitted in daycare situations.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
49. If a taxpayer does not own a home but rents an apartment, the office in the home deduction is not available.
a. True
b. False
ANSWER: False
RATIONALE: The only difference would be a substitution of rent expense for depreciation. Otherwise, the
deduction is equally available.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
50. A taxpayer who claims the standard deduction will not be able to claim an office in the home deduction.
a. True
b. False
ANSWER: False
RATIONALE: The office in the home deduction will be allowed if the taxpayer is self-employed.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
51. Under the regular (actual expense) method, the portion of the office in the home deduction that exceeds the income
from the business can be carried over to future years.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
52. For tax year 2016, Taylor used the simplified method of determining her office in the home deduction. For 2017,
Taylor must continue to use the simplified method and cannot switch to the regular (actual expense) method.
a. True
b. False
ANSWER: False
RATIONALE: A new choice is available each year. Taylor cannot, however, change the choice she made for
2016.
POINTS: 1
DIFFICULTY: Easy
KEYWORDS: Bloom's: Comprehensive
OTHER: Time: 2 min.
53. Under the simplified method, the maximum office in the home deduction allowed is the greater of $1,500 or the office
square feet × $5.
a. True
b. False
ANSWER: False
RATIONALE: The deduction is office square feet x $5 but not to exceed $1,500 or the net income from the
business.
POINTS: 1
DIFFICULTY: Easy

OTHER: Time: 2 min.
54. If the cost of uniforms is deductible, their maintenance cost (e.g., laundry, dry cleaning, alterations) also is deductible.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
55. 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.
a. True
b. False
ANSWER: False
RATIONALE: These robes do qualify as they are not adaptable for ordinary wear.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
56. 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
ANSWER: True
RATIONALE: It appears that Frank is seeking a job in the same trade or business (i.e., law enforcement).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
57. After graduating from college with a degree in chemistry, Alberto obtains a job as a chemist with DuPont. Alberto’s
job search expenses qualify as deductions.
a. True
b. False
ANSWER: False
RATIONALE: Job search expenses incurred in obtaining the first job are not deductible.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
58. Qualifying job search expenses are deductible even if the taxpayer does not change jobs.
a. True
b. False
ANSWER: True
RATIONALE: No job change requirement exists.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
59. Madison is an instructor of fine arts at a local community college. If she spends $600 (not reimbursed) on art supplies
for her classes, $250 of this amount can be claimed as a deduction for AGI.
a. True
b. False
ANSWER: False
RATIONALE: The $250 special rule for school supplies applies only to elementary and secondary school
teachers.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
60. Both traditional and Roth IRAs possess the advantage of tax-free accumulation of income within the plan.
a. True
b. False
ANSWER: True
RATIONALE: In the case of a traditional IRA, however, the income will be taxed when distributed to the
participant.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
61. When contributions are made to a traditional IRA, they are deductible by the participant. Later distributions from the
IRA upon retirement are fully taxed.
a. True
b. False
ANSWER: True
RATIONALE: Contributions are deductible, while distributions are taxable.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
62. By itself, credit card receipts will not constitute adequate substantiation for travel expenses.
a. True
b. False
ANSWER: True
RATIONALE: The credit card receipts establish the date, place, and amount of the expenditure. Because
neither the business relationship nor the business purpose is established, the substantiation
is incomplete.
POINTS: 1
DIFFICULTY: Easy

OTHER: Time: 2 min.
63. The Federal per diem rates that can be used for “deemed substantiated” purposes are the same for all locations in the
country.
a. True
b. False
ANSWER: False
RATIONALE: The Federal per diem rates are different for different locations in the United States.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
64. For self-employed taxpayers, travel expenses are not subject to the 2%-of-AGI floor.
a. True
b. False
ANSWER: True
RATIONALE: For self-employed taxpayers, travel expenses are deductions for adjusted gross income. The
2%-of-AGI floor applies only to certain deductions from AGI, such as unreimbursed employee
expenses.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
65. A taxpayer who claims the standard deduction will not avoid the 2%-of-AGI floor on unreimbursed employee
expenses.
a. True
b. False
ANSWER: False
RATIONALE: The 2%-of-AGI floor applies only to miscellaneous itemized deductions. A taxpayer who
claims the standard deduction will not be itemizing.
POINTS: 1
DIFFICULTY: Easy

OTHER: Time: 2 min.
66. Employees who render an adequate accounting to the employer and are fully reimbursed will shift the 50% cutback
adjustment to their employer.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
67. Aiden performs services for Lucas. Which, if any, of the following factors indicate that Aiden is an employee, rather
than an independent contractor?
a. Aiden provides his own support services (e.g., work assistants).
b. Aiden obtained his training (i.e., job skills) from his father.
c. Aiden is paid based on hours worked.
d. Aiden makes his services available to others.
e. None of these.
ANSWER: c
RATIONALE: Choices a., b., and d. reflect independent contractor status.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
68. Jordan performs services for Ryan. Which, if any, of the following factors indicate that Jordan is an independent
contractor, rather than an employee?
a. Ryan sets the work schedule.
b. Ryan provides the tools used.
c. Jordan files a Form 2106 with his Form 1040.
d. Jordan is paid based on tasks performed.
e. None of these.
ANSWER: d
RATIONALE: Choices a., b., and c. reflect employee status.

POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
69. Which, if any, of the following factors is not a characteristic of independent contractor status?
a. Work-related expenses are reported on Form 2106.
b. Receipt of a Form 1099 reporting payments received.
c. Workplace fringe benefits are not available.
d. Services are performed for more than one party.
e. None of these.
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
70. A worker may prefer to be treated as an independent contractor (rather than an employee) for which of the following
reasons:
a. Avoids the cutback adjustment as to business meals.
b. All of the self-employment tax is deductible for income tax purposes.
c. Work-related expenses are not subject to the 2%-of-AGI floor.
d. A Schedule C does not have to be filed.
e. None of these.
ANSWER: c
RATIONALE: Independent contractors are also subject to the cutback adjustment (choice a.). All of the self-
employment tax is not deductible (choice b.). Because all work-related expenses are
deductions for AGI, the 2%-of-AGI reduction is avoided (choice c.). Work-related expenses
will have to be reported on Schedule C (choice d.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.

71. A worker may prefer to be classified as an employee (rather than an independent contractor) for which of the
following reasons:
a. To claim unreimbursed work-related expenses as a deduction for AGI.
b. To avoid the self-employment tax.
c. To avoid the cutback adjustment on unreimbursed business entertainment expenses.
d. To avoid the 2%-of-AGI floor on unreimbursed work-related expenses.
e. None of these.
ANSWER: b
RATIONALE: The self-employment tax is twice the Social Security equivalent imposed on employees
(choice b.). Most unreimbursed employee expenses are deductions from AGI (choice a.) and
will be subject to the 2%-of-AGI adjustment (choice d.). Unreimbursed entertainment
expenses will be subject to the cutback adjustment (choice c.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
72. 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 these.
ANSWER: d
RATIONALE: Their expenses are reported on Schedule C, not Form 2106 (choice a.). Although subject to
Social Security tax, they are not subject to income tax withholdings (choice c.). Statutory
employees are not common law employees (choice b.). Expenses are deductions for AGI
(choice d.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
73. Corey is the city sales manager for “RIBS,” a national fast food franchise. Every working day, Corey drives his car as
follows:
Miles
Home to office 20
Office to RIBS No. 1 15
RIBS No. 1 to No. 2 18
RIBS No. 2 to No. 3 13
RIBS No. 3 to home 30
Corey’s deductible mileage is:
a. 0 miles.
b. 50 miles.
c. 66 miles.
d. 76 miles.
e. None of these.
ANSWER: e
RATIONALE: 15 miles + 18 miles + 13 miles = 46 miles. The mileage for driving from his home to the office
(20 miles) and from the last worksite to home (30 miles) is not deductible.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
74. Amy works as an auditor for a large major CPA firm. During the months of September through November of each
year, she is permanently assigned to the team auditing Garnet Corporation. As a result, every day she drives from her
home to Garnet and returns home after work. Mileage is as follows:
Miles
Home to office 10
Home to Garnet 30
Office to Garnet 35
For these three months, Amy’s deductible mileage for each workday is:
a. 0.
b. 30.
c. 35.
d. 60.
e. None of these.
ANSWER: d
RATIONALE: The round trip from home to Garnet (at temporary job site) of 60 miles (30 miles × 2) is the
mileage that is deductible.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.

75. Aaron is a self-employed practical nurse who works out of his home. He provides nursing care for disabled persons
living in their residences. During the day he drives his car as follows.
Miles
Aaron’s home to patient Louise 12
Patient Louise to patient Carl 4
Patient Carl to patient Betty 6
Patient Betty to Aaron’s home 10
Aaron’s deductible mileage for each workday is:
a. 10 miles.
b. 12 miles.
c. 20 miles.
d. 22 miles.
e. 32 miles.
ANSWER: e
RATIONALE: Since Aaron’s office is in his home, he has no nondeductible commuting mileage—all of the
mileage is deductible.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
76. When using the automatic mileage method, which, if any, of the following expenses also can be claimed?
a. Engine tune-up.
b. Parking.
c. Interest on automobile loan.
d. MACRS depreciation.
e. None of these.
ANSWER: b
RATIONALE: Choices a., c., and d. would be allowed under the actual cost method.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
77. In which, if any, of the following situations is the automatic mileage available?
a. A limousine to be rented by the owner for special occasions (e.g., weddings, high school proms).
b. The auto belongs to taxpayer’s mother.
c. One of seven cars used to deliver pizzas.
d. MACRS statutory percentage method has been claimed on the automobile.
e. None of these.
ANSWER: e
RATIONALE: Multiple vehicles (5 or more) cannot qualify (choice c.) nor can vehicles held for hire (choice
a.). The car must be owned or leased by the taxpayer (choice b.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
78. Under the actual cost method, which, if any, of the following expenses will not be allowed?
a. Car registration fees.
b. Auto insurance.
c. Interest expense on a car loan (taxpayer is an employee).
d. Dues to auto clubs.
e. All of these will be allowed.
ANSWER: c
RATIONALE: Interest on a car loan is deductible only by a self-employed taxpayer (not an employee)—
choice c. (This assumes the car financing is not handled with a home equity loan—see
Chapter 10.)
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
79. Dave 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, Dave is given the task of supervising their initial operation. For three months, he
works weekdays in Boise and returns home on weekends. He spends $350 returning to Salt Lake City but would have
spent $410 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 Dave’s tax home has changed from Salt Lake City to Boise.
c. $60
d. $350
e. $410
ANSWER: d
RATIONALE: Dave’s assignment in Boise is temporary, so his tax home has not changed (choice b.).
Dave’s deduction is limited to the lesser of what he actually spent and what he would have
spent had he not returned home (choice d.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
80. 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. All of these.
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
81. During the year, John went from Milwaukee to Alaska on business. Preceding a five-day business meeting, he spent
four days vacationing at the beach. Excluding the vacation costs, his expenses for the trip are:
Air fare $3,200
Lodging 900
Meals 800
Entertainment 600
Presuming no reimbursement, deductible expenses are:
a. $3,200.
b. $3,900.
c. $4,800.
d. $5,500.
e. None of these.
ANSWER: c
RATIONALE: $3,200 + $900 + $700 [50%($800 + $600)] = $4,800. No allocation is required for domestic
transportation costs (i.e., the airfare) since the trip is primarily business related.
POINTS: 1
DIFFICULTY: Moderate
OTHER: Time: 10 min.
82. During the year, Sophie went from Omaha to Lima (Peru) on business. She spent four days on business, two days on
travel, and four days on vacation. Disregarding the vacation costs, Sophie’s unreimbursed expenses are:
Air fare $3,000

Lodging 800
Meals 600
Entertainment 400
Sophie’s deductible expenses are:

a. $4,300.
b. $3,100.
c. $2,800.
d. $2,500.
e. None of these.
ANSWER: b
RATIONALE: $1,800 [60% (6 days business/10 day trip) × $3,000 (air fare)] + $800 + $500 [50%($600 +
$400)] = $3,100. The air fare has to be allocated as Sophie did not meet either the seven days
(or less) or less than 25% personal use exceptions for foreign travel.
POINTS: 1
83. During the year, Walt travels from Seattle to Tokyo (Japan) on business. His time was spent as follows: 2 days travel
(one day each way), 2 days business, and 2 days personal. His expenses for the trip were as follows (meals and lodging
reflect only the business portion):
Air fare $3,000
Lodging 2,000
Meals and entertainment 1,000
Presuming no reimbursement, Walt’s deductible expenses are:
a. $3,500.
b. $4,500.
c. $5,500.

d. $6,000.
e. None of these.
ANSWER: c
RATIONALE: $3,000 + $2,000 + (50% × $1,000) = $5,500 . Since the 7-days-or-less exception applies, the
full airfare ($3,000) is allowed.
POINTS: 1
84. In terms of meeting the distance test for purposes of deducting moving expenses, which of the following statements is
correct?
a. The taxpayer’s new job location must be at least 50 miles away from the old job.
b. The taxpayer’s new residence must be at least 50 miles away from the new job.
c. The taxpayer’s new residence must be at least 50 miles away from the old residence.
d. The taxpayer’s new job location must be at least 50 miles farther from the old residence than the old residence
was to the old job.
e. None of these.
ANSWER: d
RATIONALE: The distance comparison is between the old residence to the old job and old residence to
new job (choice d.). In this regard, the location of the new residence is immaterial (choices b.
and c.), as is the distance between the old and new jobs (choice a.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
85. As to meeting the time test for purposes of deducting moving expenses, which of the following statements is correct?
a. Work at the new location must involve a full-time job—part-time job will not suffice.
b. The taxpayer has two years in which to satisfy the 39-weeks or 78-weeks requirement.
c. The time test is waived for persons whose move follows retirement.
d. The moving expense deduction cannot be claimed if the taxpayer has not yet met the time test.
e. None of these.
ANSWER: a
RATIONALE: Full-time status (not part-time) is required (choice a.). The two-year limitation applies only to
the 78-week option—twelve months is required for the 39-week option (choice b.). The
retirement waiver applies only to expatriates (choice c.).
POINTS: 1

DIFFICULTY: Easy
OTHER: Time: 2 min.
86. Due to a merger, Allison transfers from Miami to Chicago. Under a new job description, she is reclassified from
employee to independent contractor status. Her moving expenses, which are not reimbursed, are as follows:
Transportation $1,400
Meals 400
Lodging 500
Cost of moving household goods 4,000
Penalty for breaking lease on Miami 3,000
apartment
Allison’s deductible moving expense is:
a. $0.
b. $5,900.
c. $6,100.
d. $8,900.
e. $9,300.
ANSWER: b
RATIONALE: $1,400 (transportation) + $500 (lodging) + $4,000 (moving household goods) = $5,900
(choice b.). Meals are not qualified moving expenses (choices c. and e.) nor are penalties for
breaking a lease (choices d. and e.). It is immaterial that Allison’s status as an employee
changed to that of an independent contractor (choice a.).
POINTS: 1
87. Rachel is single and has a college degree in finance. She is employed as a loan officer at a bank; her yearly AGI
approximates $50,000. During the year, she enrolled in a weekend MBA program and incurred the following
nonreimbursed expenses: $4,100 (tuition), $300 (books), $200 (other school supplies), and $200 (transportation to and
from campus). Disregarding the 2%-of-AGI limitation, as to the MBA program, Rachel has a:
a. Deduction for and deduction from AGI of $0.
b. Deduction for AGI of $4,000 and deduction from AGI of $800.
c. Deduction for AGI of $4,000 and deduction from AGI of $700.
d. Deduction for AGI of $4,100 and deduction from AGI of $700.
e. None of these.
ANSWER: b
RATIONALE: Section 222 allows up to $4,000 for qualified tuition and related expenses. As Rachel spent
$4,100, she can claim only $4,000 as a deduction for AGI. The remaining expenses of $800
($100 + $300 + $200 + $200) can be claimed as deductions from AGI.
POINTS: 1
88. The § 222 deduction for tuition and related expenses is available:
a. Only if the taxpayer itemizes deductions from AGI.
b. To deduct that portion of the tuition in excess of that allowed under the lifetime learning credit.
c. To cover the tuition of a son who does not qualify as taxpayer’s dependent.
d. Only if job related.
e. None of these.
ANSWER: e
RATIONALE: The § 222 deduction is a deduction for AGI (choice a.). The deduction is not available when
the lifetime learning credit is used (choice b.). The student involved is not a dependent of the
taxpayer (choice c.). The education need not be job related (choice d.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
89. The § 222 deduction for tuition and related expenses is available:
a. Regardless of the amount of a taxpayer’s MAGI.
b. To cover room and board expenses to attend college.
c. To a married taxpayer filing a separate return.
d. Even if a taxpayer does claim the standard deduction.
e. None of these.
ANSWER: d
RATIONALE: No deduction at all is allowed if the taxpayer has AGI in excess of $80,000 ($160,000 in the
case of a joint return) (choice a.). Section 222 does not cover room and board (choice b.). In
order to claim a deduction under § 222, a married taxpayer must file a joint return (choice c.).
Since § 222 provides for a deduction for AGI, it does not matter if a taxpayer claims the
standard deduction.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
90. Which, if any, of the following is subject to a cutback adjustment?

a. An airline pilot for an executive jet rental company who pays his own travel expenses.
b. Meals provided at cost to employees by a cafeteria funded by the employer.
c. Fourth of July company picnic for employees.
d. A trip to Bermuda awarded to the company’s top salesperson.
e. None of these.
ANSWER: a
RATIONALE: Although a reduced rate is in effect, the cutback adjustment still applies to persons subject to
regulation by the U.S. Department of Transportation.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
91. Robert entertains several of his key clients on January 1 of the current year. Expenses paid by Robert are as follows:
Cab fare $ 60
Cover charge at supper club 200
Dinner at club 800
Tips to waiter 160
Presuming proper substantiation, Robert’s deduction is:
a. $610.
b. $640.
c. $740.
d. $1,220.
e. None of these.
ANSWER: b
RATIONALE: $60 + [50% × ($200 + $800 + $160)] = $640.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.

92. Tracy, the regional sales director for a manufacturer of exercise equipment, pays $2,500 to rent a skybox for a visiting
performance of the Harlem Globetrotters. The skybox holds 10 seats, and Tracy invites 7 clients to the event. Nonluxury
seats range in price from $80 to $120. The refreshments provided during the event cost $600. If Tracy meets all of the
requirements for deductibility (i.e., business discussion, substantiation), she may deduct:
a. $900.
b. $1,100.
c. $1,260.
d. $1,500.
e. $1,550.
ANSWER: a
RATIONALE: 50% × [(10 × $120) + $600] = $900.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
93. Ralph made the following business gifts during the year.
To Robert (a key client) at Christmas $50
To Angel (Robert’s 8-year old daughter) on her birthday 20
To Art (Ralph’s secretary) on his birthday ($3 was for gift wrapping) 30
To Paige (Ralph’s boss) at Christmas 40
Presuming proper substantiation, Ralph’s deduction is:
a. $0.
b. $53.
c. $73.
d. $78.
e. $98.
ANSWER: b
RATIONALE: $25 (Robert) + $28 (Art) = $53. The gift to Angel counts as a gift to Robert (whose $25 limit
already has been reached). Gifts to superiors (Paige) cannot be deducted.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
94. Which, if any, of the following is an advantage of using the simplified method for determining the office in the home
deduction?
a. No depreciation on the personal residence has to be computed.
b. The exclusive use requirement does not have to be met.
c. Allows the expense to be classified as a deduction for AGI.
d. Can also be used for a residence that is rented (not owned) by the taxpayer.
e. None of these.
ANSWER: a
RATIONALE: The exclusive use requirement (choice b.) always has to be met for an office in the home
deduction to be available. The method chosen for arriving at the deduction has no relevance
to how it is classified (i.e., deduction for or from AGI)--choice c. Either the simplified
method or the regular method can be used for rented property (choice d.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
95. Which of the following expenses, if any, qualify as deductible?

a. Contributions to a Coverdell Education Savings Account (CESA).
b. Contributions to a qualified tuition program (§ 529 plan).
c. Job hunting expense of FBI agent who applies for the job of city manager of Beaumont (TX).
d. Contribution to a traditional IRA.
e. None of these.
ANSWER: d
RATIONALE: Although the benefits paid out are nontaxable, neither the contribution to CESAs (choice a.)
nor § 529 plans (choice b.) are deductible. Since being an FBI agent and a city manager do
not appear to be in the same trade or business (law enforcement), the job hunting expense
does not qualify (choice c.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
96. Which, if any, of the following expenses is subject to the 2%-of-AGI floor?
a. Qualified tuition expenses under § 222.
b. Contribution to traditional IRA.
c. Cost of a CPA exam review course—taxpayer just began employment with an accounting firm.
d. Office in the home deduction for a self-employed taxpayer.
e. None of these.
ANSWER: e
RATIONALE: Choices a., b., and d. are deductions for AGI. Choice c. is not deductible.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
97. Which, if any, of the following expenses is subject to the 2%-of-AGI floor?
a. Gambling losses (to the extent of gambling gains).
b. Moving expenses (not reimbursed by employer).
c. Teaching supplies (in excess of $250) purchased by a fifth grade teacher.
d. Union dues of self-employed machinist.
e. None of these.
ANSWER: c
RATIONALE: Moving expenses and teaching supplies (up to $250) are deductions for AGI (choice b.).
Likewise, the union dues of a self-employed taxpayer are classified as a deduction for AGI.
Gambling losses are miscellaneous itemized deductions but are not subject to the 2%
adjustment (choice a.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
98. Which, if any, of the following expenses are not subject to the 2%-of-AGI floor?
a. Safety shoes purchased by an plumber employed by a company.
b. Reimbursed employee expenses. Taxpayer-employee renders an adequate accounting to the employer.
c. Unreimbursed employee expenses.
d. Tax return preparation fee paid by a non-employed retiree.
e. None of these.
ANSWER: b
RATIONALE: Being employed, all job-related expenses are deductions from AGI (choice a.). All employee
expenses, unless reimbursed pursuant to an adequate accounting, are subject to the 2%-of-
AGI floor (choices a. and c.).
POINTS: 1
DIFFICULTY: Easy

OTHER: Time: 5 min.
99. In contrasting the reporting procedures of employees and self-employed persons regarding job-related transactions,
which of the following items involve self-employed?
a. Schedule C of Form 1040.
b. Form 2106.
c. Form W-2.
d. Schedule A of Form 1040.
e. None of these.
ANSWER: a
RATIONALE: Form 2106 is used by those employees who do not account to their employer(s) or are not
wholly reimbursed (choice b.). Schedule C is used to list the job-related income and
expenses of self-employed taxpayers (choice a.). Form W-2 reports the wages earned by
employees (choice c.). Income earned by self-employed persons is often shown on Form
1099. The results of Form 2106 (see choice b.) are transferred to Schedule A (choice d.)
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 3 min.
100. One of the tax advantages of being self-employed (rather than being an employee) is:
a. The self-employment tax is lower than the Social Security tax.
b. The cutback adjustment does not apply.
c. The actual cost method for deducting the business use of an automobile can be selected.
d. Job-related expenses are deductions for AGI.
e. A deduction for an office in the home is available.
ANSWER: d
RATIONALE: The self-employment tax is double what the employee pays (choice a.). The cutback
adjustment also applies to self-employed taxpayers (choice b.). Job-related expenses are
reported on Schedule C (rather than Schedule A) which results in deduction-for-AGI
treatment (choice d.). The actual cost method and the deduction for office in the home are
equally available to both employees and self-employed persons (choices c. and e.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 3 min.
101. Meredith holds two jobs and attends graduate school on weekends. The education improves her skills, but does not
qualify her for a new trade of business. Before going to the second job, she returns home for dinner. Relevant mileage is
as follows:
Home to first job 9 miles

First job to second job 13 miles
Home to second job 15 miles
Home to university 7 miles
How much of the mileage qualifies for deduction purposes?

ANSWER: 27 miles. The mileage from the first job to the second job, 13 miles, qualifies. Also, round
trip mileage to the university (14 miles) can be claimed if the education Meredith is obtaining
is deductible.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
102. Paul is employed as an auditor by a CPA firm. On most days, he commutes by auto from his home to the office.
During one month, however, he has an extensive audit assignment closer to home. For this engagement, Paul drives
directly from home to the client’s premises and back. Mileage information is summarized below:
Home to office 12 miles
Office to audit client 15 miles
Audit client to home 10 miles
If Paul spends 20 days on the audit, what is his deductible mileage?
ANSWER: 400 miles [20 miles (each day) × 20 days].
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
103. During 2017, Eva used her car as follows: 12,000 miles (business), 1,400 miles (commuting), and 4,000 miles
(personal). In addition, she spent $440 for tolls (business) and $620 for parking (business). If Eva uses the automatic
mileage method, what is the amount of her deduction?
ANSWER: $7.480. (12,000 miles × $0.535) + $440 + $620 = $7,480.
POINTS: 1

DIFFICULTY: Easy
OTHER: Time: 5 min.
104. Elsie lives and works in Detroit. She is the regional sales manager for a national fast-food chain. Due to unusual
developments, she is compelled to work six straight weeks in the Cleveland area. Instead of spending the weekend there,
she flies home every Friday night and returns early Monday morning. The cost of coming home for the weekend
approximates $600. Had she stayed in Cleveland, deductible meals and lodging would have been $700. How much, if any,
may Elsie deduct as to each weekend?
ANSWER: $600 for each weekend, the lesser of the $600 cost of returning home or the $700 cost of
staying in Cleveland.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
105. Alfredo, a self-employed patent attorney, flew from his home in Chicago to Miami, had lunch alone at the airport,
conducted business in the afternoon, and returned to Chicago in the evening. His expenses were as follows:
Airfare $900
Airport parking (Chicago) 60
Lunch 30
Taxis (Miami) 42
What is Alfredo’s deductible expense for the trip?
ANSWER: $1,002 ($900 + $60 + $42). As Alfredo was not away from home, his lunch is not deductible.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
106. Rod uses his automobile for both business and personal use and claims the automatic mileage rate for all purposes.
During 2017, his mileage was as follows:
Miles Driven
Personal 4,000
Business 8,000
Qualifying moving expense 3,500
Medical 1,800
Charitable 1,500
Qualifying education (MBA program) 800
How much can Rod claim for mileage?

ANSWER: $5,819 [(8,800 miles × $0.535, business and education) + (3,500 miles × $0.17, moving) +
(1,800 miles × $0.17, medical) + (1,500 miles × $0.14, charitable)].
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
107. Lily went from her office in Portland to Lisbon, Portugal on business. While there, she spent part of the time on
vacation. How much of the air fare of $5,000 can she deduct based on the following assumptions:
a. Lily was gone five days (i.e., three business and two personal).
b. Lily was gone five weeks (i.e., four business and one personal).
c. Lily was gone five weeks (i.e., three business and two personal).
ANSWER: a. $5,000.
b. $5,000.
c. $3,000. (60% × $5,000).
Transportation costs for mixed use (i.e., both business and personal) need not be allocated as
long as domestic trips are involved. Such allocation is necessary, however, for foreign trips
unless one of two exceptions applies. One exception deals with trips lasting seven days or
less and covers part a. (but not part b. or part c.) above. The second exception, less than 25%
of the time was for personal use, applies to part b. but not to part c. Thus, in part b. no
allocation is necessary, while in part c. the air fare must be allocated.
POINTS: 1
108. Noah moved from Delaware to Arizona to accept a better job. He incurred the following unreimbursed moving
expenses:
Transportation $3,000
Lodging 400
Meals in route 500
Penalty for breaking apartment lease 1,000
Forfeiture of athletic club membership 500
Moving company cost 7,000
What is Noah’s moving expense deduction?
ANSWER: $10,400 ($3,000 + $400 + $7,000). Meals ($500), lease penalty ($1,000), and membership
forfeiture ($500) are not qualifying moving expenses.
POINTS: 1
109. After graduating from college, Clint obtained employment in Omaha. In moving from his parents’ home in Baltimore
to Omaha, Clint incurred the following expenses:
Transportation $ 700
Meals 380
Lodging 400
Cost of moving household goods 3,500
a. How much may Clint deduct as moving expense?
b. Would any deduction be allowed if Clint claimed the standard deduction for the year of the
move? Explain.
ANSWER: a. $4,600 ($700 + $400 + $3,500). No deduction is allowed for meals.
b. Yes. Moving expenses are deductions for AGI and can be claimed regardless of
whether a taxpayer takes the standard deduction or chooses to itemize.
POINTS: 1
110. Arnold is employed as an assistant manager in the furniture division of a national chain of department stores. He is a
recent college graduate with a degree in marketing. During 2017, he enrolls in the evening MBA program of a local
university and incurs the following expenses: tuition, $4,200; books and computer supplies, $800; transportation expense
to and from the university, $450; and meals while on campus, $400. Arnold is single and his annual AGI is $64,000. As to
these expenses, what are Arnold’s:
a. Deductions for AGI?
b. Deductions from AGI?

ANSWER:
a. $4,000. Although the tuition was $4,200, § 222 imposes a limitation of $4,000.
b. $1,450. $200 (excess tuition not allowed under § 222) + $800 (books and computer
supplies) + $450 (transportation) = $1,450. No deduction is allowed for meals, since
Arnold is not in travel status. Further adjustment will be required due to the 2%-of-AGI
limitation on certain itemized deductions.
POINTS: 1
111. Cathy takes five key clients to a nightclub and incurs the following costs: $320 limousine rental, $460 cover charge,
$920 drinks and dinner, and $200 tips. Several days after the function, Cathy mails each client a pen costing $25. In
addition, Cathy pays $4 for gift wrapping and mailing each pen. Assuming adequate substantiation and a business
justification, what is Cathy’s deduction?
ANSWER: $1,255. $320 + [($460 + $920 + $200) × 50%] = $1,110. Also allowed are the gifts of $145
(5 × $29). The cost of gift wrapping and mailing each pen ($4) can be added to the maximum
amount of gift allowed ($25).
POINTS: 1
112. For the current football season, Tern Corporation pays $40,000 for a skybox (containing 12 seats) at Veterans
Stadium for eight home games. Regular nonskybox seats at each game range from $120 to $150 a seat. In November, a
Tern employee and ten clients use the skybox to attend a game. The event is preceded by a bona fide business discussion,
and Tern spent $1,000 for food and drinks during the game. What is Tern’s deduction?
ANSWER: $1,400. (12 seats × $150) + $1,000 = $2,800 × 50% (cutback adjustment) = $1,400. Even
though only ten clients attended, all available seats are considered. The highest cost of a
regular seat ($150) is used in the computation.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
113. Brian makes gifts as follows:

Cost of
Recipient
Gift
Mr. Brown (a client) $27 *
Mrs. Brown (Mr. Brown’s wife) 15
Ms. Smith (Brian’s receptionist) 30
Mr. Jones (Brian’s boss) 40
* Includes $2 for gift wrapping

Presuming adequate substantiation and no reimbursement, how much may Brian deduct?
ANSWER: $52 ($27 + $25). The deduction for Mr. Brown’s gift can include nominal costs for gift-
wrapping and engraving. No deduction is allowed for the gift to Mrs. Brown unless she is in
a separate business. Otherwise, she falls under the $25 limit applicable to Mr. Brown. The
deduction for Ms. Smith’s gift is limited to $25. No deduction is allowed for Brian’s gift to
his boss.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
114. In the current year, Bo accepted employment with a Kansas City law firm after graduating from law school. Her
expenses for the year are listed below:
Cost of bar review course $1,500
Qualified moving expenses 2,100
Job hunting expenses 1,800
Subscriptions to legal journals 450
Membership dues in bar associations 620
State bar dues 300
Since Bo worked just part of the year, her salary was only $32,100. In terms of deductions from AGI, how much does Bo
have?
ANSWER: $770. AGI is $30,000 [$32,100 (salary) – $2,100 (moving expenses)]. Thus, the 2%-of-AGI
floor is $600 ($30,000 × 2%). Qualifying itemized deductions are $1,370 ($450 + $620 +
$300). Thus, $1,370 – $600 = $770 is the allowable itemized deduction. No deduction is
allowed for the bar review course and the job hunting expenses. In this case, it is apparent
that Bo should claim the standard deduction and not itemize.
POINTS: 1
115. Rocky has a full-time job as an electrical engineer for the city utility. In his spare time, Rocky repairs TV sets in the
basement of his personal residence. Most of his business comes from friends and referrals from former customers,
although occasionally he runs an ad in the local suburbia newspaper. Typically, the sets are dropped off at Rocky’s house
and later picked up by the owner when notified that the repairs have been made.
The floor space of Rocky’s residence is 2,500 square feet, and he estimates that 20% of this is devoted exclusively to the
repair business (i.e., 500 square feet). Gross income from the business is $13,000, while expenses (other than home office)
are $5,000. Expenses relating to the residence are as follows:
Real property taxes $4,500

Interest on home mortgage 8,000
Operating expenses of residence 3,000
Depreciation (based on 20% business use) 1,000
What is Rocky’s net income from the repair business
a. If he uses the regular (actual expense) method of computing the deduction for office in the home?
b. If he uses the simplified method?
ANSWER: a. Business income $13,000
Less: Expenses (5,000)
Net business income before office in the home expenses $ 8,000
Less: Real property taxes ($4,500 (900)
× 20%)
Mortgage interest ($8,000 × (1,600)
20%)
Operating expenses($3,000 × (600)
20%)
Depreciation (1,000)
Net income fro m business $ 3,900
Net business income before office in the home expense (see part a. $ 8,000
b.
above)
Office in the home expense (1,500) *
Net income from business $ 6,500
*As no more than 300 square feet can be considered, the maximum
allowed is $1,500 (300 square feet x $5).
POINTS: 1

116. For the current year, Wilbur is employed as a deputy sheriff of a county. He has AGI of $50,000 and the following
unreimbursed employee expenses:
Attendance at a law enforcement conference ($800 for travel and $220 for meals) $1,020
Uniforms (does not include $300 for laundry and dry cleaning) 1,000
Professional dues and journals 300
Contribution to sheriff’s reelection campaign (highly recommended by Wilbur’s boss) 400
How much of these expenses are allowed as deductions from AGI?
ANSWER: $1,510. $910 + $1,300 + $300 = $2,510 – (2% × $50,000) = $1,510. A cutback adjustment of
$110 ($220 × 50%) is required for the meals obtained during the conference. No deduction is
available for the campaign contribution.
POINTS: 1
117. If a business retains someone to provide services, that person may either be an employee or be self-employed (i.e.,
independent contractor).
a. What are the tax advantages to the business of having the service provider classified as self-employed?
b. What are the advantages and disadvantages to the service provider of self-employed status?
ANSWER:
a. Self-employed persons do not have to be included in various fringe benefits programs
(e.g., group-term life insurance, accident and health plans) and retirement plans. Because
they are not covered by FICA and FUTA, these payroll costs are avoided.
The advantages are that expenses qualify as deductions for AGI. Consequently,
b. deductibility is not affected by the choice of the standard deduction, and no reduction is
required for the 2%-of-AGI floor. In terms of disadvantages, being self-employed can
lead to other state and local taxes (e.g., license fees, franchise taxes, occupation taxes,
gross receipts levy). The most significant, however, is the self-employment tax that the
taxpayer is subject to.
POINTS: 1
DIFFICULTY: Easy
NATIONAL STANDARDS: United States - BUSPROG: Technology: Technology: - BUSPROG: Technology

118. In terms of income tax treatment, what is the difference between common law and statutory employees?
ANSWER: Although subject to Social Security tax, statutory employees are not subject to Income tax
withholding. Statutory employees may claim all of their unreimbursed expenses as
deductions for AGI. For common law employees, such expenses are deductions from AGI.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
119. Myra’s classification of those who work for her as independent contractors is being questioned by the IRS. It is the
position of the IRS that these workers are really employees. What type of factors can Myra utilize to justify her
classification?
ANSWER: Myra needs to show that she has a reasonable basis for not treating her workers as
employees. In this regard, can she prove reliance on any of the following?
∙ Judicial precedent, published ruling, or technical advice.

∙ A past IRS audit that resulted in no employment tax assessment.
∙ A longstanding practice of independent contractor status in the same industry.
∙ Has Myra consistently treated these workers as independent contractors?
∙ Has she reported their earnings by filing Form 1099-MISC?
POINTS: 1
120. Taylor performs services for Jonathan on a regular basis. There exists considerable doubt as to whether Taylor is an
employee or an independent contractor.
a. What can Jonathan do to clarify the matter?
b. Suppose Jonathan treats Taylor as an independent contractor but Taylor thinks she is an
employee. What is Taylor’s recourse, if any?
ANSWER:
a. Jonathan can obtain a ruling from the IRS by filing Form SS–8 (Determination of
Worker Status for Purposes of Federal Employment Taxes and Income Tax
Withholding).
b. Taylor should file a Form 8919 (Uncollected Social Security and Medicare Tax on
Wages) with the IRS.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
121. Jacob is a landscape architect who works out of his home. He wonders whether or not he will have nondeductible
commuting expenses when he drives to the locations of his clients. Please comment.
ANSWER: Jacob has no commuting expenses since his tax home is his residence. Thus, his mileage to
and from the premises of his clients should be fully deductible.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
122. Under the automatic mileage method, one rate does not cover every type of expense. For 2017, what are the rates for
business use, education, moving, charitable, and medical?
ANSWER: $0.535 (business use); $0.535 (education); $0.17 (moving); $0.14 (charitable); and $0.17
(medical).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
123. Christopher just purchased an automobile for $40,000 which he plans to claim 100% as being for business use. In
order to take advantage of MACRS and § 179, he plans to use the actual cost method for determining his deduction in the
first year. In subsequent years, he will switch to the automatic mileage method. Comment on Christopher’s proposed
approach.
ANSWER: First, limitations are imposed on how much depreciation can be claimed over each year of the
five-year write-off period. In most cases, such limitations significantly reduce the
depreciation normally allowed. Second, the use of MACRS and/or § 179 precludes later
converting to the automatic mileage method. Lastly, how many automobiles does Christopher
own? If just one, 100% business use could be almost impossible to justify since it negates
any personal use.
POINTS: 1
124. Once set for a year, when might the IRS change the rate for the automatic mileage method?
ANSWER: Changes in the past have been justified by significant increases or decreases in fuel prices.
Such a change places a premium on keeping track of mileage on a monthly basis.
POINTS: 1
OTHER: Time: 5 min.
125. Travel status requires that the taxpayer be away from home overnight.
a. What does “away from home overnight” mean?
b. What tax advantages result from being in travel status?
ANSWER: a. “Home” for this purpose is the place of taxpayer’s principal employment. “Overnight”
need not be a 24-hour period, but it must be a time duration substantially longer than an
ordinary day’s work such as to require rest or sleep.
b. If “travel status” exists, many otherwise nondeductible expenses (e.g., meals, lodging,
transportation) become deductible.
POINTS: 1
126. When is a taxpayer’s work assignment in a new locale temporary? Permanent? What difference does it make?
ANSWER: Temporary indicates that the assignment’s termination is expected within a reasonably short
period of time. In no event can the period of absence exceed one year. If the taxpayer’s
assignment is indefinite, and not temporary, his or her tax home changes and travel status
ends.
POINTS: 1
OTHER: Time: 5 min.

127. Nick Lee is a linebacker for the Baltimore Ravens (a professional football club). During the football season he rents
an apartment in a Baltimore suburb. The rest of the time he lives with his family in Ann Arbor (MI) and works at a local
bank as a vice president in charge of public relations. Can Nick deduct his expenses while away from Ann Arbor?
Explain.
ANSWER: Probably not. Although his personal residence is in Ann Arbor, Nick’s tax home is likely to
be the Baltimore area. Considering the salaries of professional football players, Nick’s
income from the Ravens must heavily outweigh that received from an Ann Arbor bank.
Furthermore, his principal activity and the time spent (e.g., conditioning, training, playing) is
that of a player and not a banker.
POINTS: 1
128. How are combined business/pleasure trips treated for travel within the United States as opposed to foreign travel?
ANSWER: The major difference is that transportation charges are fully deductible if the trip is primarily
for business and within the United States. If the foreign trip is primarily business,
transportation expenses must be allocated between business and personal unless (1) the
taxpayer was away from home for seven days or less or (2) if less than 25% of the time was
spent on personal pursuits.
POINTS: 1
DIFFICULTY: Easy
129. Concerning the deduction for moving expenses, what circumstances, if any, will excuse a taxpayer from meeting the
time test of 39 or 78 weeks?
ANSWER: The time test will be disregarded if the taxpayer dies, becomes disabled, or is discharged
(other than for willful misconduct) or transferred by the new employer. Under certain
conditions, expatriates who retire while overseas are exempt from the time test.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
130. A taxpayer just changed jobs and incurred unreimbursed moving expenses.
a. What are his (or her) options if an income tax return has to be filed before the time test is
met?
b. What happens if the moving expense deduction has been claimed and the time test is not
later satisfied?
ANSWER:
a. The taxpayer may claim the deduction right away or wait until the time test is met and
file an amended return for the year of the move.
b. If the moving expense is claimed and the time test is not later met, a taxpayer has two
options. First, he can increase the income for the following year by the amount of the
deduction claimed. Second, he can file an amended return for the year of the move in
which the deduction is not claimed.
POINTS: 1
131. Nicole just retired as a partner in a Philadelphia law firm. She moved to San Francisco where she took a job as an
adjunct professor at a local law school. Can Nicole deduct her moving expenses? Explain
ANSWER: She can deduct her moving expenses if her status as an adjunct professor is full-time
employment. She cannot if her status is regarded as part-time employment.
POINTS: 1
DIFFICULTY: Easy
132. In terms of IRS attitude, what do the following expenses have in common?
a. Cost of a CPA exam review course.
b. Cost of a review course for the bar exam.
c. Cost of a law degree by a taxpayer who does not intend to practice law.
ANSWER: a. It is the position of the IRS that the costs associated with becoming a CPA are incurred
in order to acquire a basic skill and thus are not deductible as education expenses.
b. The same reasoning as noted in part a. above applies to review course taken to pass the
bar exam.
c. Regardless of a taxpayer’s career goals, the IRS considers a law degree to be the
acquisition of a basic skill.
POINTS: 1
DIFFICULTY: Easy
133. 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?
ANSWER: Both are partly correct and incorrect. The IRS takes the position that pursuing a law degree is
not maintaining or improving existing skills but results in acquiring a new job skill. Thus, a
legal education is not job related to accounting but constitutes a new trade or business.
However, § 222 allows a deduction for tuition (up to $4,000 or less) even if the education is
not job related. This provision allows some or all of the law school tuition to be deductible
but not other associated expenses (e.g., textbooks, transportation). In summary, some costs
can be claimed and some cannot.
POINTS: 1
DIFFICULTY: Easy
KEYWORDS: Bloom's: Analysis
134. Logan, Caden, and Olivia are three unrelated parties who claim the standard deduction. All are married and attend
Citron University and each pays tuition of $6,100. Of this payment, Logan can claim a deduction of $4,000; Caden a
deduction of $2,000; and Olivia no deduction at all. Explain.
ANSWER: The most apparent explanation is the limitation imposed on the § 222 tuition deduction.
Logan’s MAGI must be less than $130,000, while Caden’s MAGI is more than $130,000 but
not more than $160,000. Lastly, Olivia’s MAGI must be in excess of $160,000.
POINTS: 1
DIFFICULTY: Easy
135. Meg teaches the fifth grade at a local school. During the year, she spends $1,200 for school supplies for use in her
classroom. On her income tax return, some of this expense is not reported and the balance is deducted in two different
places. Explain what has probably happened.
ANSWER: Meg probably has been reimbursed for some of these expenses. If she renders an adequate
accounting to her employer, the reimbursement is not reported in her income nor is the
expense involved deducted. As to the remaining expenses, she has claimed $250 as a
deduction for AGI and the balance as a miscellaneous itemized deduction.
POINTS: 1
136. In connection with the office in the home deduction, comment on the following:
a. Mixed use (i.e., business and personal) of the portion of the home allocated to business.
b. The difference between direct and indirect expenses for deduction purposes.
c. The classification of the expense (i.e., dfor or dfrom AGI).

ANSWER:
a. In most cases, mixed use of the portion allocated to business is not allowed.
Consequently, the office must be exclusively used for business. An exception is made,
however, when the home is used as a daycare center. Here, mixed use is allowed.
b. Direct expenses (e.g., painting the office) are deductible in full because they only benefit
the office area. Indirect expenses (e.g., homeowners casualty insurance) must be
allocated since they relate to both the business and personal portions of the home. In the
case of the simplified method of determining the deduction, the distinction between
direct and indirect expenses is not relevant.
c. Like most job-related expenses, the taxpayer’s status (i.e., employed, self-employed)
governs the classification of the expense. Thus, an office in the home expense to an
employee is a deduction from AGI, while that of a self-employed taxpayer is a deduction
for AGI.
POINTS: 1
137. Regarding the new simplified method of computing the office in the home deduction, comment on the following
independent factors.
a. Taxpayer has set aside 400 square feet for use as an office.
b. Taxpayer has repainted and recarpeted the office area.
c. In past years, taxpayer has always taken the deduction using the regular (actual expense) method.
d. The net income from the business is not large.
ANSWER:
a. Unfortunately, the deduction is limited to 300 square feet--so the maximum allowed is
$1,500 (300 × $5).
b. Direct expenses cannot be claimed under this method.
c. As the choice allowed is annual, the method used in the past does not matter. However,
no carry over of unused deduction can be claimed. Also, a prior choice cannot be
changed but is binding on the taxpayer.
d. The deduction cannot exceed the net income from the property. Furthermore, any unused
deduction amount cannot be carried over to future years.
POINTS: 1
138. Faith just graduated from college and she needs advice on the tax treatment of the costs she incurs in connection with
her first job (a sales person for a pharmaceutical company). Specifically, she wants to know about the following items:
a. Job search costs.
b. Business wardrobe cost.
c. Moving expenses.
d. Deduction for office in the home.

ANSWER:
a. Not deductible as it involves Faith’s first job.
b. Not deductible since the clothes are suitable for street wear.
c. As long as the time and distance requirements are met, the moving expenses are
deductible.
Unless Faith’s employer has an office available for her in the locale where she works,
d.
she can qualify for an office in the home deduction. This result is consistent with the
convenience of the employer requirement applicable in the case of
employees. Because she is just starting, Faith will probably rent and not buy a
residence. As a renter, she will not have many indirect expenses attributable to an
office (e.g., property taxes, interest on home mortgage). Consequently, Faith might
wish to choose the simplified method of determining the office in the home expense.
POINTS: 1
DIFFICULTY: Easy

139. Regarding tax favored retirement plans for employees and self-employed persons, comment on the following:
a. The exclusion versus deduction approaches as to contributions by participants.
b. Tax-free accumulation of earnings.
c. The deferral of income tax consequences.
d. Employee versus self-employed status.
ANSWER: a. Contributions by employees to retirement plans that are qualified provide a tax benefit
either in the form of an exclusion from gross income or as a deduction for AGI. The
traditional IRA takes the deduction approach. This is also the case of contributions by a
self-employed person to a Keogh (H.R. 10) plan.
b. A characteristic of all tax-favored retirement plans is that income accumulates free of

tax. This allows for a greater accumulation to take place up to the point of distribution.
c. Except in the Roth IRA, the main objective of retirement plans is to defer taxation until
distributions are made.
d. Keogh (H.R. 10) plans are, in effect, the self-employed version of employee retirement
plans.
POINTS: 1
140. Ashley and Matthew are husband and wife and both are practicing CPAs. On a joint return, Ashley gets to deduct her
professional dues but Matthew does not. Explain.
ANSWER: Most likely Ashley is self-employed, while Matthew is employed. Thus, Ashley’s expenses
are deductions for AGI and Matthew’s are itemized deduction subject to the 2% floor. If they
do not itemize (or if they do and cannot exceed the 2% floor), Matthew loses the deduction
for his professional dues.
POINTS: 1
OTHER: Time: 5 min.
141. Isabella is a dental hygienist who works for five different dentists. She spends one day a week (i.e., Monday through
Friday) with each. All of the dentists except Dr. Stanki (the Wednesday assignment) treat her as an employee. Dr. Stanki,
however, classifies her as being self-employed. Comment on this discrepancy in treatment.
ANSWER: Unless Isabella’s Wednesday duties are significantly different than the rest of the week, Dr.
Stanki has placed himself in a vulnerable position. In terms of the proper work classification
of a service provider, one key consideration is how they are treated by other comparable
businesses. In all likelihood, therefore, Dr. Stanki will have a tough time convincing the IRS
that Isabella is an independent contractor when four of his colleagues consider her to be an
employee. More likely, Dr. Stanki desires to save on payroll taxes and avoid covering
Isabella in any fringe benefits offered to other employees.
POINTS: 1
DIFFICULTY: Easy
142. Felicia, a recent college graduate, is employed as an accountant by an oil company. She would like to continue her
education and obtain a law degree. Discuss Felicia’s tax status if she attends a local law school on a:
a. Part-time basis.
b. Full-time basis.
ANSWER: Regarding the usual education expense justification of maintaining and improving on
a. existing skills, Felicia will not succeed. The IRS has successfully maintained that
obtaining a law degree leads to a new trade or business. Reliance on § 222, however, is
appropriate since the education need not be job related. Unfortunately, § 222 only
covers tuition, is limited to $4,000, and may be reduced (or eliminated) by an AGI
limitation.
b. If Felicia quits her job and returns to college on a full-time basis, she no longer is in a
trade or business. A temporary break in employment status (e.g., leave of absence),
however, will cure this problem if properly structured. However, Felicia will still
encounter the new trade or business provision.
POINTS: 1
143. Discuss the 2%-of-AGI floor and the 50% cutback limitation in connection with various employee expenses under
the following arrangements:
a. The employee is not reimbursed by the employer.
b. The employee is fully reimbursed under a nonaccountable plan.
c. The employee is partially reimbursed under an accountable plan.
d. The employee is fully reimbursed under an accountable plan.
ANSWER:
Any cutback adjustment and the 2%-of-AGI floor are imposed on the employee. The
a. employee has the burden of being able to substantiate the expenses involved.
Furthermore, no deduction is available if the employee does not itemize deductions from
AGI.
The reimbursement must be reported as income. Deductions are handled as in part a.

b. above.
c. Unless the reimbursement identifies the expenses covered, it must be allocated between
the items that are and are not subject to the cutback adjustment.
d. A washout results. In effect the expenses are treated as deductions for AGI and fully
offset the reimbursement. As far as the employee is concerned, the expenses are not
subject to the cutback adjustment or the 2%-of-AGI floor.
POINTS: 1
144. Ramon and Ingrid work in the field of public relations and incur sizable entertainment expenses. Ramon is employed
by a consumer products company, while Ingrid is a self-employed consultant. Regarding the tax treatment of the
entertainment expenses, when would:
a. Ramon be better off than Ingrid?
b. Ingrid be better off than Ramon?
ANSWER: a. If Ramon renders an adequate accounting to his employer and is fully reimbursed. In
such a case, the employee reports no income or deduction as to these expenses. The
cutback adjustment is suffered by the employer.
b. If Ramon does not render an adequate accounting to his employer, he will have to
recognize any reimbursement as income and substantiate any deduction. Even worse, he
will be subject to the cutback adjustment and the deduction will be a miscellaneous
itemized deduction upon which the 2%-of-AGI limit is imposed. Although Ingrid also
will be subject to the cutback adjustment, she has a deduction for AGI upon which the
2% rule does not apply.
POINTS: 1
KEYWORDS: Bloom's: Analysis
Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement.
a. Indicates employee status.
b. Indicates independent contractor status.
DIFFICULTY: Easy
OTHER: Time: 2 min.
145. The services are performed at Sue’s premises.

ANSWER: b
POINTS: 1
146. Sue does not work for other parties.

ANSWER: a
POINTS: 1
147. Lynn determines when the services are to be performed.

ANSWER: a
POINTS: 1
148. Sue has unreimbursed expenses.

ANSWER: b
POINTS: 1
149. Sue was trained by Lynn.

ANSWER: a
POINTS: 1
150. Sue uses her own helpers.

ANSWER: b
POINTS: 1
151. Sue charges by the hour for her work.

ANSWER: a
POINTS: 1
152. Sue files a Schedule SE with her Form 1040.

ANSWER: b
POINTS: 1
153. Sue files a Form 2106 with her Form 1040.

ANSWER: a
POINTS: 1
154. Sue uses her own tools.

ANSWER: b
POINTS: 1
Match the statements that relate to each other. (Note: Choice L may be used more than once.)
a. Must involve the same trade or business
b. Must be for the convenience of the employer
c. Meals while in route
d. Lodging while in route
e. Out-of-town job assignment lasts for more than one year
f. Can include actual cost of parking
g. Payment for services rendered based on tasks performed
h. Excludes use of MACRS depreciation
i. Taxpayer has tools and helper provided for him
j. Transportation must be allocated if taxpayer spends two weeks on business and one week sightseeing
k. Paralegal obtains a law degree
l. Correct match not provided
DIFFICULTY: Easy
United States - AK - AICPA: FN-Reporting

OTHER: Time: 2 min.
NOTES: According to the IRS, a law degree does not maintain or improve existing skills but leads to
the creation of a new skill.
Allocation is necessary since the taxpayer meets neither of the two exceptions (i.e., trip lasts
7 days or less, or less than 25% of time was for personal purposes).
Also includes F.
155. Characteristic of a taxpayer who has the status of an employee

ANSWER: i
POINTS: 1
156. Characteristic of a taxpayer who is self-employed

ANSWER: g
POINTS: 1
157. Actual cost method of determining auto expense

ANSWER: f
POINTS: 1
158. Automatic mileage method

ANSWER: h
POINTS: 1
159. Deductible moving expense

ANSWER: d
POINTS: 1
160. Nondeductible moving expense

ANSWER: c
POINTS: 1
161. Mixed use (both business and pleasure) foreign travel

ANSWER: j
POINTS: 1
162. Education expense that is not deductible to maintain or improve existing skills
ANSWER: k
POINTS: 1
163. Tax home has changed

ANSWER: e
POINTS: 1
164. Deductible job-hunting expenses

ANSWER: a
POINTS: 1
165. Deduction by an employee of unreimbursed office-in-the-home expenses

ANSWER: b
POINTS: 1
166. Mixed use (both business and pleasure) domestic travel.

ANSWER: l
POINTS: 1
Match the statements that relate to each other. (Note: Choice L may be used more than once.)
a. Cover charge paid to entertain client at a night club.
b. Deductible even if taxpayer does not take the new job
c. Company picnic sponsored by employer
d. Use of Federal per diem allowance to substantiate meals while in travel status
e. Does not have to be job related
f. Can include cost of car insurance and automobile club dues

g. Distribution from plan is taxable
h. Distribution from plan is not taxable
i. Expatriate (U.S. person who is employed overseas) returns home to retire
j. Taxpayer moves to a new residence 55 miles closer to his present job
k. Country club membership fee
l. Correct match not provided
DIFFICULTY: Easy
United States - AK - AICPA: FN-Reporting

OTHER: Time: 2 min.
NOTES: Taxpayer did not change jobs, so no moving expense deduction is allowed.
However, withdrawals are subject to tax.
Also includes A.
Taxpayer need not accept any employment offers that result from the job search.
One of the major advantages of § 222 is that the education need not be job related.
167. Actual cost method of determining car expense

ANSWER: f
POINTS: 1
168. Distance test (for moving expenses) not satisfied

ANSWER: j
POINTS: 1
169. Time test (for moving expenses) waived

ANSWER: i
POINTS: 1
170. Roth IRAs

ANSWER: h
POINTS: 1
171. Keogh (H.R. 10) plans

ANSWER: g
POINTS: 1
172. Cutback adjustment applies

ANSWER: a
POINTS: 1
173. Cutback adjustment does not apply

ANSWER: c
POINTS: 1
174. Deemed substantiation

ANSWER: d
POINTS: 1
175. Job hunting expenses

ANSWER: b
POINTS: 1
176. Qualified tuition and related expenses (under § 222)

ANSWER: e
POINTS: 1
177. Club dues deductible

ANSWER: l
POINTS: 1
178. Club dues not deductible

ANSWER: k
POINTS: 1

Another random document with
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The Project Gutenberg eBook of Victorious
failure
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and most other parts of the world at no cost and with almost no
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Title: Victorious failure
Author: Bryce Walton
Illustrator: H. W. Kiemle
Release date: June 30, 2022 [eBook #68432]
Language: English
Original publication: United States: Standard Magazines, Inc, 1947
Credits: Greg Weeks, Mary Meehan and the Online Distributed

Proofreading Team at http://www.pgdp.net
*** START OF THE PROJECT GUTENBERG EBOOK VICTORIOUS

FAILURE ***
VICTORIOUS FAILURE
By BRYCE WALTON
[Transcriber's Note: This etext was produced from

Thrilling Wonder Stories, April 1947.
Extensive research did not uncover any evidence that
the U.S. copyright on this publication was renewed.]
With good reason, Professor H. Klauson hesitated; his wife's arms
were holding him with a strangely insistent urgency and fear. He tried
to disengage himself, but not with much enthusiasm. Although he
had not admitted it to anyone but the Presidium's psycho-medic staff,
he was afraid, too. Desperately and helplessly afraid.
"Howard, please." Her pale blue eyes were wide, staring into his with
that intimacy only someone loved completely and without
compromise ever sees. "Don't go back to the Laboratories, Howard.
Don't ever go back again."
He smiled, unsuccessfully. He had never been able to hide anything
from Lin.
"But, dear, this is ridiculous. We're scientists! We're not frightened by
vague, intangible fears."
Her hands tightened on his shoulders. "We're scientists; so let us
admit the obvious. Something doesn't want you to ever complete
your research, Howard. We've worked together for ten years, and
now you're right on the verge of discovering the secret of life itself.
And it means more to humanity than anything else in the history of
mankind. But I'm afraid, Howard, and so are you. Whatever is
against us stopped you before. Your mind almost broke. It will try
again, and this time your mind may not recover."
He managed to push her from him, and immediately he felt lonelier,
isolated. His faint laugh sounded foolishly insincere.
"Lin, for the love of science! You sound like a mystic. Any mind is
liable to become unintegrated. You talk about invisible, intangible
forces. These things can only be in men's minds, dear. No mentality
is immune to disorientation."
She sobbed, her head swung back and forth hopelessly. A cloud of
lovely hair glinted liquidly in the shifting light from the harmonics
glowing from the transparent walls of their apartment. He couldn't
leave her in this state.
"Lin, darling, listen to me. I can't abandon my life's work. Particularly
something so profoundly important to humanity. One more
projection, and my 'closed system' principle will be concluded. After
that, think of it, Lin! This is really the one thing mankind has been
seeking. All his other activities are only bypaths. With eternal life
possible, mankind will have a real reason for struggling onward. Lin
—"
"No, Howard," she was saying, brokenly. "There isn't an argument.
To me, your mind is more important. Why did your mind black out
just before you could finish your last experiment? Why, the whole
magnificent psycho-medical staff at the Presidium couldn't find a
reason. All the charts show you to be amazingly normal. There is
something bigger than our science, Howard. It doesn't intend for you
to ever finish your research."
"A woman's intuition?" he said sardonically.
"Not a woman's," she corrected. "Ours. Because you feel it the same
as I do."
A sick, vague fear came over him as he stood there nervously,

remembering the gleaming, arched height of the biochemistry wards
at World Science Presidium. That singularly awful instant just before
he could finish his last experiment, when all his mental faculties had
crumbled. The microfilm protector had just commenced whirring.
Then that final spiraling downward into desperate gray fear and
unconsciousness.
There had to be a logical explanation so that whatever blockage
stood between him and the conclusion of his research could be torn
down. The secret of the single cell had long been his. Whatever that
three-dim microphoto film revealed, he and only he could turn the
key to open the ultimate secret door into victorious eternity for all
mankind. Now he blinked burning eyes. Lin was, of course, right. He
felt it, too. A hidden, omnipresent kind of force that would prevent
him from completing his research. But such a thought was adult
infantilism, at best. A hidden force! In his world there had to be
logical sequence of cause and effect. But even the psycho-medic
staff hadn't been able to find one.
"Howard," she was saying, lips quivering. "Remember our Moon
House?"
Klauson bristled, froze. "I remember. The World gave us a
magnificent marble house on the Moon overlooking Schroeter's
Canyon—a return favor for my many gifts to mankind. What a
juvenile farce. Imagine me sitting up there on the Moon, with you—
two futile little escapists, haunted by our own uselessness, and our
fears. No, Lin. I've my particular destiny to fulfill. It isn't hiding away
on the Moon. I'll never accept retirement on the Moon, or any place
else. Either now, or after my research on the life force. I'd rather die
than stop working in science."
He started for the exit panel. Her voice cut deeply, slowed him,
turned him.
"You're going to the Laboratories again then," she asked faintly, "in
spite of what happened before?"
He nodded, but when he tried to say yes, his throat was dry and
sticky.
"Good-by, Howard," she said.
She was crying when he left. It made him feel terribly lost and guilty
to leave her crying. But he had to. What made it so bad was that Lin
had never cried before; she was so strong, emotionally. Without any
real cause, this made him more nervous and irritable. But he was
one of the world's greatest scientists. Everything must have a cause,
somewhere. Sometime.
His gyrocar dropped down on the spacious roof-landing of the
Biochemistry Building at the World Science Presidium. It was
beginning to rain—solid, heavy, sharp-driving drops that spattered on
the dull, plastic mesh as he walked hurriedly across it to the ingress.
"Hello, Professor Klauson. This is a surprise. I didn't know you would
be coming back so soon."
Klauson started violently, clutched at his heart. A sudden, shooting
pain was there. Yet the staff had found nothing wrong with his mental
or physical integration. They had checked and rechecked.
"Oh—it's you—Larry!" He paused, relieved. "You—you startled me,
Larry. I didn't see anyone on the landing."
"I just came over to do a little work on my own," Larry explained.
He was a young, enthusiastic, highly capable student biochemist,
with a shock of unruly black hair. He had graduated from World Tech
seven years ago, and had been Klauson's assistant for five, working
with him faithfully, sometimes during those grueling sixty-four hour
stretches. He had been the only one with Klauson when he had lost
consciousness.
"Didn't expect you back so soon, Professor," said Larry, talking
casually as their elevator dropped them down below the sub-floor
level into the spacious, almost vaulted silence of Klauson's private
laboratories. "Say, Professor, you intend to try to finish up again
tonight?"
Klauson stiffened. He was here, he felt capable enough. It was only
a matter of a few hours. Why not? Even as a therapeutic measure.
"I believe I will, Larry. I wasn't intending to, but now that you're here,
too, I might as well."
Larry said nothing. He stood in the soft, yet full brilliance of the
invisible fluoresce, his black, almost blue hair hanging over his eyes.
He smiled. Klauson started, he had never quite responded this way
to Larry's expression before. It seemed—peculiar, rather strange. He
discarded that chain of thought and looked about his laboratory.
Nothing had changed. Not that Klauson had expected things to be

different. The microphoto film cabinets stood tier upon tier, a long
stretch of recorded effort, a complete step-by-step, intricate process
of creating life from that awesome moment when he had known the
successful preparation of the first simple colloid and had started on
his first organic synthesis.
Through the actual combination of the first molecules and the
organic colloid and then the first tiny speck of synthesized
protoplasm. The frenzied day and night battle against time. Time,
that was the predominant factor in nature that did the trick. But he
had compressed millions of years into twenty-five. From simple,
organic compound through the simple colloid, the protein, the
primitive protoplasm, the simplest unicellular organism, the flagellate
and—then the great jump into the structure of the gene, the ferreting-
out of that intricate, vital combination that gave man life and
maintained it. He had conquered—almost.
The high, arched ceiling in the lab with its glowing columns and its
streamlined equipment had been provided him by the entire earth—
provided him by man's cooperative faith in himself. Men who would
find so much greater an impetus to fight ahead if they only knew that
whatever other success they might have, their ultimate end was
inevitably life, instead of death.
But he would affirm a greater investment of their faith than their
wildest dreams had ever granted him. No other man, or combination
of men, in the world could synthesize all the knowledge in those
cabinets and emerge with the final answer that he alone could
evolve. No one but himself. Larry Verrill might possibly develop some
capacity to work on the chain. But unlikely. High specialization had
made it Klauson's responsibility alone.
Enthusiasm, eagerness was returning; the fear was gone.
"It's so simple, really, now that it's practically over," he said as he
unzipped his aerogel cloak, and stepped toward the microphoto film
projector. He was talking mostly to himself, a habit of his, only partly
to Verrill.
"Yes," said Larry softly. "I suppose you might call it simple."
"Carrel saw to it that cells with which he experimented had a chance
to achieve immortality. Under controlled conditions, the growth
proceeds forever, logically. The body, a collection of cells, is a
'closed system.' Like a gyrocar, that's what we called it, didn't we,
Larry? No closed system can endure unless it can inspect itself, oil
itself, and keep itself in repair. A gyrocar can't do that, but the body
can and does, though imperfectly."
Klauson warmed to his subject, and his voice assumed a fresh vigor.
"We've conquered that imperfection! Yet I can hardly believe it
myself. People can go on living without that final terrible,
unconscious fear of death that must defeat them. One more
projection, Larry. One remaining link for correlation. The answer is
right here in this projector. An actual three-dimensional record of the
very first spark in the heart of the cell itself, the primary bursting of a
carbon atom commingling with a single cell, creating life. It's the first
and the final record, Larry."
Larry nodded, but his lips were twisted in a rather sad, cynical smile,
it seemed to Klauson.
"So simple, isn't it, Professor?"
"Yes, it really is," asserted Klauson, his enthusiasm blinding him to
the peculiar reaction of Larry Verrill. "Whatever is revealed in this
three-dim projection will contain the final step for the infinite
prolongation of human life. When I synthesize it with Compton's H-9
film, we'll have it. Incredible, isn't it?"
"You may not realize just how incredible. How could you?" said
Verrill. "Nor I either, for that matter."
Klauson hesitated, his hand frozen above the button that would
throw the projector into life. Then, shrugging, his hand started to
move down. But it didn't.
For then, unbelievably, terrifyingly, it happened a second time.
Professor H. Klauson felt a blackness encompassing the mighty,
vaulted laboratory. It closed in tightly, smothering, icy. It wrapped his
entire swirling mind in darkness....
A little round man smiled broadly at him from a stool close to his bed
in the psycho-ward.
"Remember me, Professor?" His face beamed with self-possession.
"You're the clinic psychologist who handled the other
electroencephal checkup," said Klauson quickly. "Or are you?"
"Good recall," commented the psychologist. "Name's Dunnel. I've
rechecked your whole file since your—ah—second disorientation.
Weak alphas of course; but that's necessary in your type. No
disrhythmia. Tempo's exceptionally well balanced. Look, Professor
Klauson, there is still no logical reason for your being here. But
meanwhile, these charts don't fib. But I'm not so smug as to think we
know so much about the old cortex. Still, logically, we can't find a
reason."
"But there must be a—"
"Oh, we'll find out, Professor. How do you feel now? The harmonics
working all right?"
"Not quite. Dunnel, both times I have been, well, terribly afraid before
the attacks. Some kind of intuition. My wife noticed it, too."
"You're beginning to build delusions and rationalizations. We must
guard against that. You're bound to put undue emphasis on it, make
it far more complex and important than it really is, because it
happened at such critical moments. You deal in absolutes,
Professor. Cause must equal effect."
"But it wasn't coincidence either time," insisted Klauson. "Not
logically. Coincidence is too simple, too handy a gadget, Dunnel.
Isn't it?"
"Maybe," said Dunnel, lighting a cigarette. "Anyway, I won't burden
you with a lot of hasty probing around. The Staff says you're O.K. to
leave the clinic today. Come to my office tomorrow afternoon if you
feel like it. If you don't, call me up and tell me why. See you
tomorrow."
A little later after the Staff had given him another thorough going-
over which revealed nothing amiss, he met his wife who was waiting
for him with their gyrocar on the roof-landing.
Only a third of Klauson's normal life was gone, yet he looked twice
his age except for rare moments like this. He kissed Lin almost
boyishly as they stood together looking over the gleaming plastic
structures piercing a clear, blue sky. A soft warm summer wind blew
disarmingly over Washington.
Finally Klauson said abruptly: "I'm sorry, Lin. You were right. I'll admit
the obvious. Something beyond the scope of our science is blocking
my progress. But what is it?"
She shook her head, her eyes brooding with concern for him, deep,
dark.
"I've talked with the Science Council," she finally said in a whisper.
She turned with resolution to face him. "Howard, they have agreed
with me. You need a very long vacation. Our Moon House is
gathering Lunar dust, if there is any. I have the Council's support
now. We're going to the Moon and we're not going to think about
anything that even suggests biochemistry."
"There isn't any such a thing, not on this world," said Klauson.
"Howard. We're going to raise extraterrestrial flowers."
Klauson stared, and was suddenly and violently angry.
"Flowers! You're mad!"
"But the Council's on my side, Howard. They're going to"—she
paused, lips trembling—"going to accept your resignation from the
Presidium."
A sick hate flooded his stomach, burst in his brain. He was stunned,
impotent. He quivered silently. It was their own staff that had said
there was nothing wrong with him! Yet, they were demanding that he
resign! Rest on that escapist's bromide, Luna. Retreat from reality;
rot in meaningless isolation.
"I'll not do it, Lin," he announced harshly. "I refuse to drop a
conclusion that might mean the final step in human evolution."
He was dazed, ill, as she led him silently into the gyrocar and piloted
it to their apartment. No use arguing with Lin about it. She had that
ageless woman's selfish love to protect her own kind. She and the
Council had combined to work against him, instead of helping him
solve the cursed enigma.
As soon as they reached home, Klauson contacted the Council
President, Gaudet, on the teleaudio. He argued the case, objected
fiercely, begged. Gaudet was kind, logical.
"We're all so sorry, Klauson," his huge head said. "But it is quite
obvious that you absolutely need a lengthy period of relaxation.
Although our own staff can find no logical basis for this decision, we
undoubtedly shall, and soon.
"You worked almost steadily for ten years. It is very possible that
some highly specialized cellular blockage has developed that even
our probers have failed to detect. A few years, raising flowers as
Mrs. Klauson has suggested, something completely dissociated from
your present work, is probably the answer. Then you can return to
your laboratories. Meanwhile, your assistant, Larry Verrill, can
continue with your research, perhaps?"
"Verrill is an excellent assistant," Klauson said, controlling himself
with difficulty. "But he can never finish my work. I operate, many
times, empirically; you know that. My brain alone holds the key to
correlate most of the basic links of the chain."
But no amount of discussion could persuade Gaudet. It had all been
definitely decided by the Council and Lin. He would retire to the
Moon House by Schroeter's Canyon and raise fantastic flowers in
the Moon's unique environmental conditions. He would vegetate and
rot with the flowers!
"Raising flowers!" Klauson sagged, groaned helplessly, desperately.
The next afternoon in Dunnel's office with its psycho-harmonies
shifting benevolently from the opaque walls, Dunnel was saying:
"Fear of failure, that's one possibility; unlikely though. Doesn't check
with your psycho-charts."
"There is no doubt," Klauson said. "I'm just as certain about this
conclusive step as I've been about every one I've taken since I
began."
"But you don't know," Dunnel pointed out, "until you've concluded
and some illusive censor prevents that. Wait! Here's another
possibility: maybe you're afraid of the consequences of giving
humanity the ability to live forever! Think of what it would mean.
Think of it consciously! I can't. It's too big. Every basic pattern
completely altered. Psychology and the social sciences, particularly,
would no longer apply. Humanity would become something unhuman
by all present standards of evaluation. It's really an alien concept,
Professor. Subconsciously, you're afraid of what it would mean!"
"I see your reasoning there, Dunnel. Frankly, I've never considered
that at all. I've been so wrapped up in the thing itself."
"But let's assume that your subconscious has been working on it,"
insisted Dunnel. "I tell you, Professor; you go back to that laboratory
of yours, right now. Get in there with all the fatal paraphernalia and
just introspect for a while. Think of the whole, and go beyond the
limits of your specialized course. There are so many possible
consequences to a sudden transition from mortality to immortality.
Think about the things that can, and will, happen. Seems to me, that
might well be the motivation for the fear. And, Professor, come back
and see me tomorrow."
Klauson was like the pilots who get rocket psychosis on their first
Luna run, and who must immediately make another flight or lose
their resistance to space-fear forever. He must go back to the
laboratory. Try again.
And Dunnel's diagnosis about Klauson's possible fear of the
consequences of giving humanity sudden immortality—he definitely
had something there. Klauson wondered why he had never thought
of it before. Like Dunnel had said, it would change every present
standard of humanity. The enormity of the possible repercussion!
Klauson trembled a little with triumph. Yes, that could be the basis for
the fear. A scientist must weigh the consequences of his discoveries.
Would the secret of eternal life be a boon, or a catastrophe for man?
Klauson entered a public teleaudio booth and got Verrill's apartment
in east Washington. Verrill's eyes seemed to have changed—they
looked like those of someone else. Ridiculous. Yes, he did need a
rest.
"Verrill," he said tightly, "I'm going back to the laboratory again, right
now. I want you there, too."
Verrill's eyes widened, then narrowed. His mouth slipped into that
sad, cynical grin.
"If you insist, Professor. And you always would, of course."
"Why—er—naturally, I will," said Klauson. "Meet me there in fifteen
minutes."
The teleaudio faded, but Klauson sat there a moment. He brushed at
his face wearily. So strange, the way Verrill had talked—like a
stranger almost. But fifteen minutes later the vaulted height of the
gleaming laboratory was very silent, and seemed, somehow, cold, as
Klauson saw Verrill walking toward him. Verrill seemed to blot out the
laboratory, loom extraordinarily large before him.
Klauson had unconsciously been backing away. He felt the hard cold
light of the supporting column against the small of his back. He was
looking fearfully, into Larry Verrill's eyes.
Into his eyes! Into incredible, swirling blackness. Into space and time
and—eternity.
He was looking into incredible swirling blackness—and space and
time and eternity.
And Professor H. Klauson—knew.

"Varro," said the thin, wavering body. "It is time for your little
transmigration. The Switcher is ready. Don't think too much about
what you must do. We are four-dimensional but we are still not very
well adapted to the complications of the coordinate stream."
Klauson knew, yet it was far beyond his capacity to understand. He
was seeing something that had happened, yet was still to happen.
Fourth dimensionally, time, as he knew it, was meaningless. The
man who had spoken in this strange world revealed by Verrill's alien
brain, was named Grosko. The other figure, Varro, was also Verrill.
Klauson knew that, but he understood very little.
Grosko's boneless fingers were manipulating the matrix coordinate
console.
"I've never been convinced," muttered Varro. "It is an
incomprehensible cycle, even to our fourth-dimensional minds.
Where can there ever be any logical end?"
"You have already taken on some of your three-dimensional
characteristics—those of Verrill, whose body you will assume control
of, and merge your mentality with. Already you are beginning to think
in terms of absolutes, in terms of three-dimensional logic. Forget a
hypothetical end, which our fourth-dimensional consciousness
knows cannot exist. You will encounter no difficulties. You will
gradually adjust yourself to their concepts of the absolute; but still
you will retain enough of your Varro mentality to carry out your
assignment."
"But it seems so unprogressive in the Universal sense," persisted
Varro. "Everything seems only a big, futile circle."
"But not for us; that is your three-dimensional absolutism creeping in
already though you have not even begun merging with Verrill yet.
You are beginning to make premature psychological adjustments.
There are countless tangents of probability. And in the particular one
that has evolved us, Professor Klauson must be prevented from
completing his research. If he does, we will not evolve. But of course
we have evolved, so it is inevitable that you will carry out your
assignment successfully. Inevitable."
"No free agency, even in the eternal sense," mused Varro.
"Everything in all dimensions of space-time is interdependent. We
are aware of it, because of our fourth-dimensional minds, but those
of Klauson's stage of development are not."
"That is correct," said Grosko. "They realize that everything that has
happened is determined by a complex array of circumstantial
causes, but they see this only in immediate, comprehensible
perspective. The same is true in the Universal also, and in the time-
anlim, which their three-dimensional consciousness cannot
comprehend.
"Cause and effect, fourth-dimensionally, works also in what they
would consider, reversal. What they see as an effect, is also cause.
They tie in past, future, present, with cause and effect. Really there
is no association. An effect can be in what they consider their past;
and a cause can exist in their future. But you will understand after
you assume possession of Verrill's consciousness."
"I hope so. It certainly seems terribly involved to me right now."
"That is a natural reaction of Verrill's mind which you are already
beginning to associate yourself with. Well, Varro, you are ready for
the complete alteration?"
"Naturally," said Varro. "It is on the chronosophic charts, isn't it?"
"Good-by, then," said Grosko. "Don't use the Power unless you find it
absolutely necessary, then only mildly of course—"
Varro was enveloped in the radiations of the matrix. His
consciousness molecules leaked slowly into the unsuspecting and
narrow confines of Larry Verrill's three-dimensional consciousness
as he graduated from World Tech in 2081, two years before he was
to become the laboratory assistant of Professor H. Klauson.
"You—you're Varro?" Klauson managed in a hoarse whisper.
Larry Verrill nodded. A curtain had dropped over Verrill's eyes behind
which those incredible, incomprehensible vistas had opened for a
brief interim.
Klauson staggered. There was no basic comprehension. No two-

dimensional being could imagine such a thing as UP. What he
termed past, present, future, to a fourth-dimensional concept would
be regarded in the same way as if he, Klauson, were floating a mile
in the air regarding the activities of a two-dimensional plane-man.

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17. For tax purposes, “travel” is a broader classification than “transportation.”

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72. Statutory employees:

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Air fare $3,000

Sophie’s deductible expenses are:

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90. Which, if any, of the following is subject to a cutback adjustment?

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95. Which of the following expenses, if any, qualify as deductible?

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Home to first job 9 miles

How much of the mileage qualifies for deduction purposes?

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How much can Rod claim for mileage?

a. Deductions for AGI?

b. Deductions from AGI?

113. Brian makes gifts as follows:

* Includes $2 for gift wrapping

Real property taxes $4,500

What is Rocky’s net income from the repair business

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∙ Judicial precedent, published ruling, or technical advice.

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c. The classification of the expense (i.e., dfor or dfrom AGI).

a. Job search costs.

b. Business wardrobe cost.

d. Deduction for office in the home.

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b. A characteristic of all tax-favored retirement plans is that income accumulates free of

The reimbursement must be reported as income. Deductions are handled as in part a.

145. The services are performed at Sue’s premises.

146. Sue does not work for other parties.

147. Lynn determines when the services are to be performed.

148. Sue has unreimbursed expenses.

149. Sue was trained by Lynn.

150. Sue uses her own helpers.

151. Sue charges by the hour for her work.

152. Sue files a Schedule SE with her Form 1040.

153. Sue files a Form 2106 with her Form 1040.