Question

ransportation (LO 3.3)

Teresa is a civil engineer who uses her automobile for business. Teresa drove her automobile a total of 11,965 miles during 2019, of which 80% was business mileage. The actual cost of gasoline, oil, depreciation, repairs, and insurance for the year was $6,440. Teresa is eligible to use the actual or standard method.

If required, round your answers to the nearest dollar.

a. How much is Teresa's transportation deduction based on the standard mileage method?

Meals and Entertainment (LO 3.5)

Grace is a self-employed sales consultant who spends significant time entertaining potential customers. She keeps all the appropriate records to substantiate her entertainment. She has the following expenses in the current year:

Meals where business was conducted $5,000 Greens fees (all business) 500 Tickets to baseball games (all business) 500 Country Club dues (all business use) 6,000

b What are the tax-deductible meals and entertainment expenses Grace may claim in the current year?

Answer 1

Assumption: In Absence of Specific Information Solution is given as per US Taxation & Rules.

Answer:

a.

Teresa's Transportation Deduction based on the Standard Mileage Method: $ 5,552.

Explanation

Standard Mileage Method- Under This method Transportation Deduction is upto Standard Mileage Rate as provided by Internal Revenue Service (IRS) for Business mileage.

For 2019, Standard Mileage Rate (As Provided by IRS) = $ 0.58 Per Miles.

Teresa's Business Mileage = Total Mileage × % Of Business Mileage.

11,965 (Given) × 80%.

9,572 Miles.

Teresa's Transportation Deduction based on Standard Mileage Method = Teresa's Business Mileage × Standard Mileage Rate.

9,572 × $ 0.58

$ 5,551.76

$ 5,552 (Round Off).

Thus, Teresa's Transportation Deduction based on Standard Mileage Method = $ 5,552.

b.

Tax Deductible Meals for Grace= $ 2,500.

Tax Deductible Entertainment Expenses for Grace = $ 0.

Explanation:

Tax Deductible Meals for Grace:

As Per Tax Cuts and Jobs Act only 50% of Meal Expense for Business is tax-deductible.

Total Meal Expense for Business Incurred by Grace = $ 5,000. (Given).

Tax-deductible Meal Expense is only 50% of Total Meal Expense = $ 5,000 × 50%.

$ 2,500.

Thus, Grace's Meal Expense Deduction will be $ 2,500.

Tax Deductible Entertainment Expenses for Grace:

As Per Tax Cuts and Jobs Act Taxpayer can not deduct Entertainment Expenses.

Based on above Explanation, Grace's Entertainment Expenses Deduction will be $ 0.