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AC256_Finley_Joey_Employee_Expenses_and_Deferred_Compensation_Unit 9

# AC256_Finley_Joey_Employee_Expenses_and_Deferred_Compensation_Unit 9

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Running head: EMPLOYEE EXPENSES AND DEFERRED COMPENSATION 1 Employee Expenses and Deferred Compensation Joey Finley Kaplan University Federal Tax AC256 Emil Koren July 18, 2011

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Employee Expenses and Deferred Compensation 1) Problem 9-52: Employment-Related Expenses- Mike incurs the following employment-related expenses in the current year: Actual automobile expenses \$ 2,500 Moving expenses (deductible under Sec. 217) 4,000 Entertainment expenses 1,500 Travel expenses (including \$500 of business meals) 2,500 Professional dues and subscriptions 500 Total 11,000 Mike’s AGI is \$120,000 before any of the above expenses are deducted. None of the expenses listed above are reimbursed by Mike’s employer. He has no other miscellaneous itemized deductions and does not use the standard deduction. a) What is the amount of Mike’s deduction for employment-related expenses? i) Mike is subject to a 2% floor : (a) Automobile expenses = \$2,500 (b) Entertainment \$1,500 x 0.50 = 750 (c) Travel (excluding meals) = 2,000 (d) Meals \$500 x 0.50 = 250 (e) Professional dues = 500 (f) Total = \$6,000 ii) Mike’s moving expenses of \$4,000 will be deductible for AGI, which makes Mike's AGI; \$120,000 - \$4,000 = \$116,000. (1) Nondeductible expense floor \$116,000 AGI x 0.02 = \$2,320 (2) Miscellaneous itemized deductions from AGI \$6,000 – \$2,320 = \$3,680 (3) Moving expenses for AGI not subject to any limit + 4,000 (4)
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AC256_Finley_Joey_Employee_Expenses_and_Deferred_Compensation_Unit 9

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