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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
$10,291 Business mileage 18,700/2=9,350
9,350 * .51
9,350 * .55.5 = $5,189
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 =
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?
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
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
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.
- Spring '11