Chapter 6 w solutions

Chapter 6 w solutions - Burkett – Tax I - Chapter 6 Auto...

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Unformatted text preview: Burkett – Tax I - Chapter 6 Auto Expenses – Example 12, pp. 6.7-8 Answer is different than the book. Why? Nancy is a self employed real estate salesperson. In the 2011 she uses her car 18,700 miles for business & 3,800 miles for commuting to the office & other personal reasons for a total of 22,500 miles. Assume the business mileage was incurred evenly over the year. Her auto expenses are depreciation, insurance, license, repairs =$14,000, tolls & parking while on business = $125 & interest on car loan = $250 Business use %? 18,700/22,500 = 83% Deduction using standard mileage rate? Depreciation, insurance, license, repairs $14,000 Tolls & parking while on business 125 x 1 = 125 Interest on car loan 250 x.83= 208 9,958 $10,291 Business mileage 18,700/2=9,350 9,350 * .51 = $4,769 9,350 * .55.5 = $5,189 $9,958 Total auto deduction on schedule C $10,291 Reduction in auto basis? 18,700 x .22 = $4,114 Deduction using actual expenses? Depreciation, insurance, license, repairs $14,000 x.83 = 11,620 Tolls & parking while on business 125 x 1 = 125 208 250 x.83 = $11,953 Total auto deduction on schedule C $11,953 Interest on car loan Continued on next Page>>>>>> 1 Burkett – Tax I - Chapter 6 Auto Expenses – Example 12, pp. 6.7-8 w/addl information Itemized deduction allowed if Nancy is self employed? Interest if on a home equity loan = $250-208= $42 (deducted above) What would change in the previous example if Nancy was an employee and not self employed? 1. Interest? Only deductible if the loan is secured by home. 2. Property tax (if any)? All deductible as itemized deduction (follows normal rules that apply to individual deductions). 3. Other allowed expenses: Reimbursed by employer? Cannot deduct Unreimbursed expenses? Carry from Form 2106 to misc. ID subject to 2% floor. 2 Burkett – Tax I - Chapter 6 Travel expenses – Example 14 & 15, pp. 6.8-9 Ex: 14: Theresa is a self employed CPA who travels to Houston for 10 days. She spends 6 days visiting family & 4 days auditing her client. What is her travel deduction considering the following expenses were incurred? Book $0 340 Meals @ $40 per day Incidentals @ $15 per day *4 Total travel deduction on Sch. C 60 $480 *4 * 50% 80 60 Hotel @ $85 per night *4 340 80 Airplane ticket $195 (Per Book???) Me $195 $675 Ex: 15: What would change if she spent 3 days visiting her family & 7 days auditing her client? Airplane ticket $195 $195 Hotel @ $85 per night 595 Meals @ $40 per day 40*7*50% 140 Incidentals @ $15 per day 60 Total travel deduction on Sch. C $990 What if she took her husband? Incremental costs for him aren't deductible unless she has a legitimate business purpose for having him there. Hotel costs would be deductible at single rate (if different from doubleoccupancy rate). Continued on next Page>>>>>> 3 Burkett – Tax I - Chapter 6 Assume Theresa was an employee instead of self employed? Form 2106 Reimbursed expenses: Meals? ER would take 50% deduction Other allowed expenses? Reimbursed expenses = no deduction Unreimbursed expenses: Form 2106 Meals? She would reduce meals by 50% and put it on Form 2106. That form flows to Sch A as ID subject to 2% of AGI floor. Other allowed expenses? Form 2106 flows to Sch A as ID subject to 2% of AGI floor. 4 ...
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This note was uploaded on 02/22/2012 for the course ACCT 403 taught by Professor White during the Spring '11 term at South Carolina.

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