Question

Problem 2 (15 points) A curt is self-employed as a real estate salesman and drives his car frequently to take clients to uently to take clients to see homes for sale Curt drove his car 20,000 miles for business purposes and 25,000 miles in total His actual expenses for operating the auto including depreciation are $10,000 since he drove it so much during the year. Curt has used the actual cost method since he started his business in 2015. Determine Curt's deductible auto expense for the year. Explain the basis for your response. 8.Dennis, the owner of Dennis Company, incurs the following expenses while away from home on a 3. week business trip during 2018: $800 1,800 740 Airfare from Chicago to Boston Hotel charges Meal charges Dry cleaning and laundry Local transportation Business entertainment Business gift to Boston customer 100 40 150 45 In addition to the above expenses, Dennis incurred Trint

Problem 2

Answer 1

Actual Expenses method:

Total expenses including depreciation are $10000. Since the driver used the car for business purposes = 20000/25000 i.e. 80% of the time, the Actual Expenses deduction is $8000 ($10000 x 80% = $8000) - (i)

Standard Mileage method:

Business purpose mileage = 20000 miles

In tax year 2019, the Standard Mileage rate @ 58 cents/mile

So, 20000 business miles X 58 cents/mile = $11600 - (ii)

From (i) & (ii), Curt will be able to deduct $ 3600 more at $11600 by using Standard Mileage method. However, since he has used actual cost method, it will yield a deduction of $8000 in case he wants to continue using the same method.