1. Look at the Form 1040 you prepared for George Morales. What is the amount on Form 1040, Line 40?

a. $ 5,350.
b. $ 7,850.
c. $ 3,670. 
d. $ 2,075.

2. Look at the Form 1040 you prepared for George Morales. What is the amount on Form 1040, Line 74a?

a. -0- owes $ 328.
b. $ 160.
c. $ 704. 
d. $ 1,160.

3. You are considered to be traveling  away from home if

a. Your duties require you to be away from your general area of your tax home substantially longer than an ordinary day's work.
b. You need to sleep or rest to meet the demands of your work while away from home.
c. You are on a temporary assignment. 
d. All of the above except for C.

4. You are traveling away from your home if you need to sleep or rest to meet the demands of your work while away from home. The rest requirement can be satisfied by merely napping in your car. 

True False

5. If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the one year rule. This means you may be able to deduct travel expenses even if you are away from your tax home for more than one year provided you meet other requirements. For you to qualify, the Attorney General (or his or her designee) must certify that you are traveling  

a. For the federal government.
b. In a temporary duty status.
c. To investigate or prosecute, or provide support services for the investigation or prosecution or a federal crime.
d. All of the above.

6. You can deduct the cost of meals if

a. It is necessary for you to stop for substantial sleep or rest to properly perform your duties while traveling away from home on business.
b. The meal is business-related entertainment.
c. Meals do not take place in a luxury restaurant.
d. Both A and B are correct.

7. In deducting meals, the term "incidental expenses" means

a. Fees and tips given to porters, baggage carriers, bellhops, hotel maids, stewards and others on ships, and hotel servants in foreign countries.
b. Transportation between places of lodging or business and places where meals are taken, if suitable meals can be obtained at the temporary site.
c. Mailing costs associated with filing travel vouchers and payment of employer-separated charge card billings.
d. All of the above.

8. You can deduct all of your travel expenses if your trip was entirely business related. If your trip was primarily for business and, whilst at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct

a. Your business-related travel expenses.
b. Your cost of travel of getting to and from your business destination.
c. Any business-related expenses at your business destination.
d. All of the above.

9. If your trip was for some business but primarily for personal reasons, such as a vacation, the entire cast of the trip is a nondeductible personal expense.

True False

10. Your trip is considered entirely for business if you did not have substantial control over arranging the trip. The fact that you control the timing of your trip does not, by itself, mean that you have substantial control over arranging your trip. You do not have substantial control over your trip if you

a. Are an employee who was reimbursed or paid a travel expenses allowance.
b. Are not related to your employer.
c. Are not a managing executive. 
d. All of the above.

11. If you travel outside the United States primarily for business but spend some of your time on other activities, you generally cannot deduct all of your travel expenses. You can only deduct the business portion of your cost of getting to and from your destination.

True False

12. Caroline, a travel agent, traveled by ocean liner from New York to London, England, on a business in May. Her expense for the 6-day cruise was $3,900. Caroline's deduction for the cruise is

a. $ 3,900.
b. $ 3,336.
c. $ 1,668. 
d. None of the above.

13. The daily limit on luxury water travel does not apply to expenses you have to attend a convention, seminar, or meeting on board a cruise ship.

True False

14. You are not subject to the 50% limit if you provide meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community.

True False

15. You entertain a customer. The cost is an ordinary and necessary business expense and is allowed under the entertainment rules. The customer's spouse joins you because it is impractical to entertain the customer without the spouse. You

a. Can deduct the cost of entertaining the customer's spouse. .
b. Can deduct the cost of entertaining your spouse when she joins the party because the customer's spouse is present.
c. Generally cannot deduct the cost of entertainment for your spouse or for the spouse of a customer. 
d. Both A and B are correct.

16. If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you

a. Can treat the tickets as a gift or entertainment.
b. Have to treat the tickets as a gift since you did not attend.
c. Have to treat the tickets as entertainment because the customer has been entertained. 
d. None of the above.

17. You must determine whether your assignment is temporary or indefinite when you start work. Normally, your job or assignment is temporary if

a. You expect it to last for less than 5 years.
b. You expect it to last for one year or less.
c. It is determined temporary when you start and it does not matter that it actually does last more than a year. 
d. None of the above.

18. Generally, your tax home is

a. Your regular place of business or post of duty, regardless of where you maintain your family home.
b. The place where you maintain your family home.
c. The place that you register with the IRS on the first day of your job assignment. 
d. The place where you live.

19. You are a construction worker. You live and regularly work in Los Angeles. You are a member of a trade union in Los Angeles that helps you get work in the Los Angeles area. Because of a shortage of work, you took a job in a construction project in Fresno. Your job was scheduled to end in 8 months. The job actually lasted 10 months. You realistically expected the job in Fresno to last 8 months. The job

a. Lasted more than 8 months so your new tax home is Fresno.
b. Lasted 10 months so it is considered permanent.
c. Is temporary and your tax home is still in Los Angeles. 
d. None of the above.

20. You can deduct entertainment expenses only if they are both ordinary and necessary and meet the Directly related test and the Associated test. To meet the directly-related test for entertainment expenses (including entertainment-related meals), you must show that

a. The main purpose of the combined business and entertainment was the active conduct of business.
b. You did engage in business with the person during the entertainment period.
c. You had more than a general expectation of getting income or some other specific business benefit at some future time.
d. All of the above.

21. A reimbursement or other expense allowance arrangement is a system or plan that an employer uses to pay, substantiate, or recover the expenses, advances, reimbursements, and amounts charged to the employer for employee business expenses. Arrangements include per diem and car expenses. A fixed amount of daily reimbursement your employer gives you for your lodging, meals, and incidental expenses is

a. A per diem allowance.
b. A car allowance.
c. An accountable plan.
d. All of the above.

22. A reimbursement or other expense allowance arrangement is a system or plan that an employer uses to pay, substantiate, or recover the expenses, advances, reimbursements, and amounts charged to the employer for employee business expenses. Arrangements include per diem and car expenses. An amount your employer gives you for the business use of your car is

a. A per diem allowance.
b. A car allowance.
c. An accountable plan.
d. All of the above.

23. For 8 months of each year Mr. Kim lives in Ocala, Florida training horses for several owners and earning approximately $20,000. He rents an apartment for the 8 months. He stays in motels or rented rooms at various racetracks in other states for the other 4 months on the year during horse season and earns approximately $10,000. What part of Mr. Kim's travel expenses can be deducted?

a. All meals and lodging for the entire year.
b. Only his meals and lodging for the 4 months he is away from his tax home, Ocala.
c. None of his meals or lodging because he has no tax home.
d. One-third of his total meals and lodging because he is away from his tax home one-third of the year.

24. For tax purposes, travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. An expense has to be required to be considered necessary.

True False

25. The 50% limit on deductibility of business related expenses applies to

a. Meals and entertainment while traveling away from home on business.
b. Attending a business convention or reception, business meeting, or business luncheon at a club.
c. Entertaining customers at your place of business.
d. All of the above.

26. Transportation expenses other than the traveling away from the home are also deductible. Allowable transportation expenses does not include expenses of 

a. Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home.
b. Visiting clients or going to a business meeting away from your regular workplace.
c. Traveling away from the home overnight.
d. Getting from your home to a temporary workplace when you have one or more regular places of work. These temporary workplaces can be either within the area of your tax home or outside that area.

27. If you have more than one job, you must determine which one is your regular or main job. Consider

a. The total time you ordinarily spend in each place.
b. The level of your business activity you have at each place.
c. Whether your income from each place is significant or insignificant.
d. All of the above.

28. If you keep timely and accurate records, you will have support to show the IRS if your tax return is ever examined. You will also have proof of expenses that your employer may require if you are reimbursed under an accountable plan. You cannot deduct amounts that you approximate or estimate. You should keep proof you need in an account book, diary, statement of expense, or similar record. You should also keep

a. Documentary evidence that, together with your record, will support each element of an expense.
b. Documentary evidence, such as receipts, cancelled checks, or bills, to support your expenses.
c. Documentary evidence, other than lodging, that is less than $75.
d. Both a and b are correct.

29. If you regularly work at two or more places in one day, whether or not for the same employer, you can deduct your transportation expenses of getting from one workplace to another. You cannot deduct your transportation costs between your home and a second job

a. on a day off from your main job.
b. on a day you work for your main job.
c. on a day that you work your second job.
d. on any day.

30.  You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work

a. on a day off from your main job.
b. on a day you work for your main job.
c. on a day that you work your second job.
d. on any day.

31. Look at the Form 540 you prepared for George Morales. What is the amount on Form 540, Line 18?

a. $ 3,516.
b. $ 7,032.
c. $ 2,075. 
d. $ 1,220.

32. Look at the Form 540 you prepared for George Morales. What is the amount on Form 540, Line 66?

a. $ -0- owes $49.
b. $ 655.
c. $ 11. 
d. $ -0- owes $126.

33. Travel expenses paid or incurred in connection with temporary duty status (exceeding one year), involving the prosecution (or support of the prosecution) of a federal crime, should not be included in the California amount.

True False