Question

Using 2019 IRS forms and the information below, William is 53 and Joyce is 51. They are married. William is a manager for ABC Corporation, a firm that manufactures and distributes widgets. Joyce is a self-employed author of children’s books. The taxpayer wish to minimize their tax by deferring income and accelerating deductions when possible.

1. Joyce is active in the local school PTA. During the year, she receives an award (a plaque and a $100 gift certificate that were donated to the PTA by local merchants) for outstanding service to the organization.

2. In January, Joyce purchases a new car for $15,000 to use in her business. Joyce pays $5,000 in cash and finances the balance through the dealer, paying $200 of interest on the loan for the year. During the year she drives 4,000 miles for business and 6,000 for other purposes. Total expenses for the 10,000 miles driven are :

repairs and maintenance, $100, insurance, $200 and gasoline, $1,000.

Answer 1

Option-1

Total Method

Joyce Purchase a Car Worth Rs $15000 which is depreciable asset and can claim depreciation as expense and also claim expense stated above i.e repairs and maintenance $ 100,Insurance $ 200 and gasoline $ 1000,interest on car i.e $ 200 for reducing the income and tax liability even through she drives 6000 miles for other purpose can claim the expense as it owned for the business purpose and received a Gift certificate of $ 100 which is not part of business

Option-2

Proportionate Method

Joyce Purchase a Car Worth Rs $15000 which is a depreciable asset and can claim depreciation proportionately i.e 4: 6 ratio as expense and also claim expense in the ratio of 4:6 stated above i.e repairs and maintenance $66.67,Insurance $133.33 and gasoline $666.67,interest on car i.e $133.33 for reducing the income and tax liability Which uses for other purpose and cannot claim as expense for payment of tax and received a Gift certificate of $ 100 which is not part of business