Question

A taxpayer's employer provides a car to the employee for business trips and personal travel.

The taxpayer keeps a log book and travels 3,000 km for business use and 2,000 km for private use over the 3 months test period.

During the year the taxpayer traveled a total of 12,000 kms.

The operating costs reflected on the corporate credit card amounted to $15,000

The depreciation cost was $5,000.

What is the maximum deduction the taxpayer can claim?

Select one:

a. $9,000

b. $3,400

c. $0

d. $12,000

Answer 1

Answer: d) $ 12,000

Explanation:

When a car is provided to employees for both business and personal use. Only the expenses related to business use are deductible as expenses. Such expenses can be calculated on the basis of usage percentage by the employee for business purpose.

In the given case, car used for business purpose can be arrived as follows:

For 3 month test period = ( business use/ total use = 3000kms/5000kms = 0.60 or 60% business use.

Total business expense = ($ 15,000 + $ 5000) x 60% = $ 9,000

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