Question

Charley Long is a truck driver, the 18-wheeler variety. He is an independent contractor for Fishy Co., a seafood company in Mobile, Alabama Charley's job entails delivering fresh fish to restaurants and wholesale fish distributors in Mississippi and Louisiana. Charley's routine varied. Sometimes, he drives straight back to Mobile from Lafayette. On other occasions, he will ull of at a truck stop and sleep in his cab before returnin will spend the night in a motel along the road. g to Mobile. His cab is equipped with sleeping facilities, although small and sparse. Finally, on other occasions, Charley When Charley drives straight back to Mobile, Charley will eat one meal. When he sleeps overnight (either in his cab or in a motel), he will eat meals, a late dinner and breakfast. During the current year, Charley incurred the following expense: Meals incurred on nonstop trips 1,000 Meals incurred when: slept in cab Slept in motel Lodging 5800 600 2,800 Total 5,200 ISSUE: The IRS has disallowed all of the above expenses on the grounds that they are not bona fide travel expenses but personal expenses and stated Charlie owes taxes on the entire $5,200. Assume Charlie appropriately prepared a Form Schedule C with his personal tax return and included these expenses as part of his business. Prepare a response to the IRS Indicating the amount of expenses deductible. In your letter indicate the ount of taxes owed, assume Charlie is in the highest tax bracket. The letter should be at least 400 words in length riety. He is an independent contractor for Fishy Co., a seafood company İkble, Alabama Charley's job entails delivering fresh fish to restaurants and wholesale fish distributors in Mississippl and Luislana. Charley's routine varied. Sometimes, he drives straight back to Mobile from Lafayette. On other occasions, he will pull of at a truck will spend the night in a motel along the road. When Charley drives straight back t before returning to Mobile. His cab is equipped with sleeping facilities, although small and sparse. Finally, on other occasions, Charley to Mobile, Charley will eat one meal. When he sleeps overnight (either in his cab or in a motel), he will eat two meals, a late dinner and breakfast. During the current year, Charley incurred the following expense: Meals incurred on nonstop trips Meals incurred when: slept in cab Slept in motel 1,000 5800 600 odging 2,800 Total 5,200 ISSUE: The IRS has disallowed all of the above expenses on the grounds thatneyau oron Schdle C with bis personal tax return and included stated Chartle owes taxes on the entire $5 these expenses as part of his business, Prepare a response to the IRS Indi amount of taxes owed, assume Chartle is in the highest tax bracket. The letter should be at least 400 th his personal tax return and included 55,200 Assume C cating the amount of expenses deductible. In your letter Indicate the are welcome to use these as support in your letter You are encouraged to use tax resources to help you determine which items are deductibile, You a appropriate.

Answer 1

If any assessee incurred any expense during the continuation of service for complete the service in that case that expense will be Business expense and will be allowed as an deduction from Business Income.

In the above mentioned case the it is necessary to incurred those expense to complete the actual service and those expense are bona fide expense however in this case driver need to submit all the Invoice of expenses that he incurred.

If the driver has all the bill/Invoice then all of these expense I.e $5,200 will be allowed as Expense from their Business income.

As here mentioned in question that driver Charley also maintain Form C where he separately mention that which expense is for their personal use and which for Business. So the ground of IRS is not correct to tax all these expense as it should be allowed as a deduction from Business Income.