Question

Deductions General Concepts and Trade or Business Deductions 29. Are any of the following expenditures deductible on an individual taxpayer's income tax return? Explain each item. Amount $100 3.000 Expenditure Cost of having income tax return prepared by a CPA Legal fee for divorce proceeding of which 20 percent related to exploring advice Lost wages for time to work while having income tax return prepared Legal fee for et pang advice of which 35 percentated to tax planning return Cost of having ledert prepared by a CPA Total expenditures 54.350 30. Two years ago, Jack Peters borrowed $150.000 from the First National Bank which he used to buy equipment used in his business Business slowed considerably this year, and Jack was unable to make payments on the loan. To keep the bank from foreclosing on the note, Jack's father made several payments on the loan during the year. Of the total payments he made on the loan, $10,000 was attributable to interest and the remainder was applied to reduce the principal balance. Can Jack's father deduct the $10,000 in interest expense he paid on Jack's loan? Explain. 31. For the current month, Jackson Cement Co. incurred payroll expenses as follows: 9788 Gross salaries and wages Payroll taxes: CASD Social Security 41850 employer's share HI (Medicare tax-employer's share 126.638 Amounts withheld and paid to the government: Employee income taxes withheld (108.990) OASDI-employees' share (41.850) employees'share (9.788) What amount can Jackson claim as a tax deduction for salary and wage expense? How much can Jackson deduct as tax expense?

Answer 1

29. The cost of having an income tax return prepared by a CPA is deductible on an individual taxpayer’s income tax return. Expenses incurred for the determination, collection, or refund of any tax are deductible.

The legal fees for divorce proceedings are deductible to the extent that is related to tax planning. Thus, $600 ($3,000 * 20%) will be deductible and the rest $2,400 will not deductible.

Lost wages for time missed from work while having income tax returns is not deductible on an individual taxpayer’s income tax return as it is not included in the income.

Legal fees for estate planning advice is deductible to the extent that is related to production, maintenance or the generation of taxable income, or for tax planning. Thus in given case $315 ($900 * 35%) will be deductible and the rest $585 will not be deductible.

The cost of having federal gift tax return prepared by a CPA is deductible on an individual taxpayer’s income tax return. Expenses incurred for the determination, collection, or refund of any tax are deductible