Monique is a self-employed manufacturer's representative who solicits business for clients and receives a commission based on sales. She incurs the following expenditures during the current year: Item Amount Airfare and lod

Monique is a self-employed manufacturer's representative who solicits business for clients and receives a commission based on sales. She incurs the following expenditures during the current year:

Item

Amount

Airfare and lodging while away from home overnight

$ 4,000

Business meals while traveling at which business is discussed

1,000

Local transportation costs for automobile, parking, tolls, etc. (business related)

2,000

Commuting expenses

1,000

Local entertainment of customers

2,000

Total

10,000

Required:

a. Which of the expenditures listed above (if any) are deductible by Monique?The deductible expenditures are local entertainment of customers, local transportation costs for automobile, parking, tolls, etc (business related), and business meals while travelling at which business is discussed

b. Are each of these items classified as for AGI or from AGI deductions? Each of the items are not classified as for AGI or from AGI deductions

c. How would your answers to Parts a and b change if Monique were an employee rather than self-employed and none of the expenses were reimbursed by her employer? If monique was an employee she would have deductibles and her earnings will have nothing to do with AGI

Michelle is an employee who must use her personal automobile for employment-related business trips. During the current year, Michelle drives her car 60% for business use and incurs the following total expenses (100% use of car):

Item

Amount

Gas and oil

$ 9,000

Repairs

1,400

Depreciation

4,700

Insurance and license fees

1,300

Parking and tolls (business related)

100

Total

$ 16,500

Michelle drives 24,000 business miles during the current year and receives a reimbursement of 40 cents per mile from her employer. Assume that an adequate accounting is made to Michelle's employer.

Required:

a. What amount is deductible (before the 2% nondeductible floor) if Michelle elects to use the standard mileage method? Use the 2013 mileage rate.

b. What amount is deductible (before the 2% nondeductible floor) if Michelle uses the actual cost method?

Can taxpayers switch back and forth between the mileage and actual methods each year?

Michael graduates from New York University and on February 1st of the current year, accepts a position with a public accounting firm in Chicago. Michael is a resident of New York. In March, Michael travels to Chicago to locate a house and starts to work in June. He incurs the following expenses, none of which are reimbursed by the public accounting firm.

Item

Amount

Automobile expense en route (1,000 miles at 24 cents per mile - standard mileage rate)

$ 240

Cost of meals en route

100

Househunting trip travel expenses

1,400

Moving van expenses

3,970

Commission on the sale of Michael's New York condominium

3,500

Points paid to acquire a mortgage on Michael's new residence in Chicago

1,000

Temporary living expenses for on week in Chicago (hotel and $100 in meals)

400

Expenses incurred in decorating the new residence

500

Total expenses

$ 11,110

Required:

a. What is Michael's moving expense deduction?

List the expenses that are not deductible and

why.

b. How are the deductible moving expenses classified on Michael's tax return? For or From AGI?

c. How would your answer to Part a change if all of Michael's expenses were reimbursed by his employ

For each of the following independent situations, determine whether any of the expenditures qualify as deductible education expenses in connection with a trade or business (Reg. Sec. 1.162-5). Are the expenditures classified as for AGI or from AGI deductions?

Required:

a. Law school tuition and books for an IRS agent who is pursuing a law degree: $2,000.

b. Continuing professional accounting education expenses of $1,900 for a self-employed CPA: travel, $1,000 (including $200 meals); registration fees, $800; books, $100.

c. MBA education expenses totaling $5,000 for a business executive of a major corporation: tuition, $4,000; transportation, $800; and books, $200. Assume he is an employee.

d. Tuition and books acquired for graduate education courses required under state law for a schoolteacher in order to renew a provisional certificate: $1,000.

e. Bar review courses for a recent law school graduate: $1,000.

Darrell is a self-employed consultant who uses 15% of his home exclusively as an office. Darrell operates completely out of his home office and makes all of his appointments from the office as well as keeping his books and records in the office. Darrell's gross income from his consulting business is $60,000 in the current year. He incurs $6,000 of expenses that are directly related to his business, such as computer and office supplies. Below are expenses that relate to Darrell's residence for the current year:








	Item		Amount
	Real estate taxes		$ 4,000
	Mortgage interest		8,000
	Insurance		1,000
	Depreciation		4,000
	Repairs and utilities		1,000
	Total		$ 18,000

Required:

a. Which of the above expenditures (if any) are deductible? Are they for AGI or from AGI deductions?






		Why are his expenses deductible?
		Are they for or from AGI?




b. How would your answer change if Darrell was an employee of a consulting company and maintained an office at home in order to take work home with him so he did not have to spend so many hours at his consulting company office? What expenses, if any, would be deductible?

er and he received a check for $11,110?

11 years ago

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