Which of the following will be included in taxable income because it is NOT a “reasonable...

Which of the following will be included in taxable income because it is NOT a “reasonable allowance”?

$750 allowance for employment related trip expenses (actual costs were $700).

$6,000 allowance for employment related use of employee’s automobile (10,000 km @ $0.60/km).

$750 allowance for employment related trip expenses (actual costs were $800).

$500 allowance for employment related use of employee’s automobile (2,000 km @ $0.25/km).

Solutions

Expert Solution

Based on the above question, the correct answer is Option A - $750 allowance for employment related trip expenses (actual costs were $700). This would be included in the taxable income because even though the cost of the trip is $700, the allowance provided is $750. As such, this is not a "reasonable allowance" and would hence be included in the taxable income of the of the taxpayer.

Option B is incorrect. The $6,000 allowance for employment related use of employee's automobile is valid based on the limits allowed . i.e :- 10,000 kms @ $0.60 per kilometer = $6,000

Option C is incorrect. This is a reasonable allowance because even though the actual costs of the trip amounted to $800, the employee was reimbursed only upto $750. Hence, this option is correct.

Option D is incorrect. The $6,000 allowance for employment related use of employee's automobile is valid based on the limits allowed . i.e :- 2,000 kms @ $0.25 per kilometer = $500

ekkarill92 answered 1 year ago

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