Question

tom 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 tax planning advice Lost wages for time missed from work while having income tax return prepared Legal fee for estate planning advice of which 35 percent related to tax planning advice 250 900 100 Cost of having federal gift tax return prepared by a CPA Total expenditures $4,350

Answer 1

Fees paid for preparing a tax return is tax deductible hence $100 given to CPA can be deducted from Taxable income.

Though legal fee paid for divorce proceedings is not tax deductible being personal nature expense, however, legal fee incurred in connection with the determination, collection, or refund of any tax shall be tax deductible. Hence 20% of 3000 i.e. 600 $ can be tax deductible

Loss of wages for time missed from work while having income tax income tax return prepared is not tax deductible as Tax return filing is responsibility of every tax payer. However amount paid to CPA shall be tax deductible.

Fees related to estate planning are deductible only to the extent they relate to the production, or maintenance or the generation of taxable income, or if for tax advice or tax planning. Since 35% of $900 of estate planning expenses are for tax planning advice, same shall be tax deductible.

Cost of preparation of federal gift tax return is not tax deductible.

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