Question

For the past two years, Minsu, a Korean American, worked as a high school physical education teacher. He was also a body-builder and a part-time graduate student in educational technology at State University. As part of preparing a masters thesis, Minsu decided to participate in Arnold’s World Body-building training program and analyze advanced technology used to help students absorb physical education. Arnold’s training program had a regular faculty, curriculum, an enrolled body of students, and advanced technology in its gym equipment. Minsu earned $4,000 during the fall 20X5 as a body-builder; he came in second in the state contest. Minsu paid $5,000 in spring 20X5 for tuition related to his masters degree at State University for one class on advanced computer technology and another $3,000 to participate in the gym. How much can Minsu deduct? Minsu knows about relevant educational tax credits and wants you to focus just on the deductions.

Answer 1

Legal Issue

Minsu wants to know that how much of expenses he can deduct on taxes. He also wants educational Tax credits and wants to focus on deductions. Business expenses are the costs which are incurred to carry on any business or trade practices. These will be deductible only if the business is running to generate profits. For 2012, the standard mileage rate for the expense of working your vehicle for business use is 551 2 pennies for every mile. Vehicle costs and utilization of the standard mileage rate (26 U.S.C.A. Section, 162), (26 U.S.C.A. Section, 170), (Publication 463)

List of Relevant Authorities

There are two main conditions which needs to be fulfilled to call an expense as Business Expense. That expense must needs to be both ordinary and necessary. An ordinary is the one that is commonly accepted in a business or trade practices. A necessary is the one that supports and appropriate for a business or trade practice.

Here, the code 16 USC, Section 162(a), clearly states that a person can deduct all expenses pertaining to his schooling and his job. The entirety of the preparation that was done, the mileage that he set on his vehicle for making a trip to and from preparing and each other cost related with his Master thesis can be deducted.

Discussion of the Law

There will be allowed as deduction all the ordinary and necessary costs paid or caused during the taxable year in continuing any exchange or business, including (1) a reasonable allowance for salaries or any other compensation for personal services actually rendered; (2) Traveling costs (counting sums exhausted for suppers and housing other than sums which are rich or lavish in light of the current situation) while away from home in the quest for an exchange or business; and (3) Rentals or any other payment which is required to be made as a condition to the continued use (or Possession), for purposes of the business or trade practice, of property to which the taxpayer has not taken or is not taking title or within which he has no equity. (26 U.S.C.A. Section, 162)