Answer the following statements true (T) or false (F)

Question

1. Clarissa is a very successful self-employed real estate attorney. She spends $5,000 per year taking her clients out to dinner upon completion of a sale. Unfortunately, Clarissa is not a good recordkeeper and does not maintain receipts. However, such meals are standard practice in her field, and trade journals indicate that $5,000 is a reasonable amount for a successful high-end attorney. Clarissa will be allowed to deduct $2,500.
2. Generally, 50% of the cost of business gifts is deductible up to $25 per donee per year for self-employed individuals.
3. If an employee incurs travel expenditures and is fully reimbursed by the employer, neither the reimbursement nor the deduction is reported on the employee's tax return if reporting is pursuant to an accountable plan.
4. An employer adopts a per diem policy for hotel and meal travel reimbursements for employees, following the IRS tables. Employees will no longer have to submit any documentation.
5. Camellia, an accountant, accepts a new job located 1,000 miles away from her current job location. She has to pay a moving company plus the transportation costs for herself to move to the new location. The new employer does not pay moving costs. Camellia will be allowed a deduction for the work-related move.

Answer 1

1. FALSE
The Cohan rule does not apply to entertainment expenses. Full documentation, including receipts, must be maintained in order to deduct business entertainment expense.
2. FALSE
There is no 50% reduction for the deduction of business gifts.
3. TRUE
The employee has been "made whole" under an accountable plan.
4. FALSE
The taxpayer must still substantiate the time, place and business purpose of the trip.
5. FALSE
Deductions are no longer allowed for moving expenses except for active duty members of the Armed Forces moving pursuant to a military order and incident to a permanent change of station.