Question

Mona works for Leonardo Corporation as a sales representative. Leonardo gives her a travel allowance of $240 per month. During 2018, she spends the following amounts on valid travel expenses:

Transportation: $2100

Meals: $1200

Lodging: $1500

Mona is allowed a deduction for adjusted gross income for the ______ of reimbursed expenses. The _____ of unreimbursed expenses are not deductible as miscellaneous itemized deductions.

If Leonardo's reimbursement plan is a nonaccountable plan, the _____ reimbursement must be included in Mona's gross income.

Answer 1

Answers_ $2880

$1920 - $1680 = $240

$2880

EXPLANATION:-

Mona receives $2,880 ($240 x 12) of reimbursement for $4,800 of expenses, putting her in a net deduction situation. Mona must include the $2,880 in her gross income. With an accountable plan, Mona is allowed a deduction for adjusted gross income for the $2,880 of reimbursed expenses. The $1,920 of unreimbursed expenses are deductible as miscellaneous itemized deductions. The unreimbursed portion of each expense is 40% ($1,920 ÷ $4,800). Mona is subject to the 50% limit on meals for her itemized deductions, leaving her a deduction of $1,680:

Transportation ($2,100 x 40%) =$ 840

Meals($1,200 x 40% x 50%)= $240

Lodging($1,500 x 40%) =$600.

Total miscellaneous itemized deduction $ 1,680.

The $1,680 employee business expense is added to any other allowable miscellaneous itemized deductions and the total is deductible to the extent it exceeds 2% of Mona's adjusted gross income.

With a nonaccountable reimbursement plan, the $2,880 reimbursement must be included in Mona's gross income. Mona is not allowed to deduct any of her expenses for adjusted gross income. Mona can only deduct the costs as miscellaneous itemized deductions, subject to the 2% of adjusted gross income limitation. The meals expenses are subject to the 50% limit, resulting in an itemized deduction of $4,200: Transportation= $ 2,100
Meals ($1,200 x 50%) =$600
Lodging =$1,500
Total itemized deduction $ 4,200 .
The $4,200 employee business expense is added to any other allowable miscellaneous itemized deductions and the total is deductible to the extent it exceeds 2% of Mona's adjusted gross income.