Question

Please take into consideration that this is for 2019 tax year

49. Ryan is self-employed. This year Ryan used his personal auto for several long business trips. Ryan paid $1,500 for gasoline on these trips. His depreciation on the car if he was using it fully for business purposes would be $3,000. During the year, he drove his car a total of 12,000 miles (a combination of business and personal travel). a) Ryan can provide written documentation of the business purpose for trips totaling 3,000 miles. What business expense amount can Ryan deduct (if any) for these trips? b) Ryan estimates that he drove approximately 1,300 miles on business trips, but he can only provide written documentation of the business purpose for trips totaling 820 miles. What business expense amount can Ryan deduct (if any) for these trips?

Answer 1

The two expenses that Ryan can charge towards business expenses are (i) Gasoline expense, and (ii) Depreciation expense

Solution (a):
Total miles traveled = 12,000
Total miles pertaining to business purpose = 3,000
therefore, percentage use of vehicle for business purpose = ( (3000 / 12000) * 100) = 25%
Therefore, the following expense can be allocated towards business:
(i) Gasoline expense = $1,500 * 25% = $375
(ii) Depreciation expense = $3000 * 25% = $750

Solution (b):
Total miles traveled = 12,000
Total miles pertaining to business purpose = 1300
However, Total miles pertaining to business purpose which can be proved = 820
therefore, percentage use of vehicle for business purpose (only to the extent can be proved) = ( (820 / 12000) * 100) = 6.833%
Therefore, the following expense can be allocated towards business:
(i) Gasoline expense = $1,500 * 6.833% = $102.495
(ii) Depreciation expense = $3000 * 6.833% = $204.99