Multiple Choice Questions
Betty, a salesperson, is an employee with $52,000 AGI who maintains a home office for the convenience of her employer, Smart Systems. The office takes up 5% of Betty's home and is used exclusively for her job. Smart Systems reimburses all of Betty's direct costs of maintaining the home office. Betty also incurs the following expenses associated with her home.
Expense Amount
Real property taxes on residence ....................................... $3,500
Interest expense on residence ........................................... 5,000
Operating expenses on residence ....................................... 1,800
Depreciation on residence (based on 5% home office use) .......... 150
Considering these facts, how much may Betty deduct from AGI on her Form 1040, assuming that she elects to itemize deductions?
a. $0
b. $665
c. $9,410
d. $10,450
2. Pinnacle Productions, Inc., holds a luxury skybox season ticket at a local sporting arena. Pinnacle uses the skybox to entertain clients while conducting business meetings. The cost of Pinnacle's luxury skybox season ticket is $25,000; the cost of the most expensive non-luxury season ticket is $15,000. How much of the luxury skybox season ticket cost may Pinnacle deduct from its corporate taxable income?
a. $7,500
b. $20,000
c. $10,000
d. $15,000
3. Claire is a self-employed individual who owns and runs Claire's Creations LLC. In 2016, she reported $225,000 in net self-employment earnings, including a deduction for 50% of the self-employment tax, prior to any Keogh deduction. Claire contributes to a defined contribution stock bonus Keogh plan. What is the highest deductible Keogh contribution Claire can make for the 2016 tax year?
a. $56,250
b. $225,000
c. $52,000
d. $45,000