Question

Joe operates a business that locates and purchases specialized assets for clients, among other activities. Joe uses the accrual method of accounting but he doesn’t keep any significant inventories of the specialized assets that he sells. Joe reported the following financial information for his business activities during year 0.
Determine the effect of each of the following transactions on the taxable business income. (Select "No Effect" from the dropdown if no change in the taxable business income.)

f. Joe hired a new sales representative as an employee and sent her to Dallas for a week to contact prospective out-of-state clients. Joe ended up reimbursing his employee $460 for airfare, $510 for lodging, $410 for meals, and $310 for entertainment (Joe provided adequate documentation to substantiate the business purpose for the meals and entertainment). Joe requires the employee to account for all expenditures in order to be reimbursed.

g. Joe uses his BMW (a personal auto) to travel to and from his residence to his factory. However, he switches to a business vehicle if he needs to travel after he reaches the factory. Last month, the business vehicle broke down and he was forced to use the BMW both to travel to and from the factory and to visit work sites. He drove 200 miles visiting work sites and 78 miles driving to and from the factory from his home. Joe uses the standard mileage rate to determine his auto-related business expenses. (Round your answer to whole number. Use standard mileage rate.)

h. Joe paid a visit to his parents in Dallas over the Christmas holidays. While he was in the city, Joe spent $130 to attend a half-day business symposium. Joe paid $360 for airfare, $114 for meals during the symposium, and $68 on cab fare to the symposium.

Determine if it is (Amount of deduction, Amount of income, or No effect for each and the dollar figure associated).

Answer 1

Q (f)

Fully allowable deduction to Joe:

i) Airfare : $ 460

ii) Lodging : $ 510

Total $ 970

One-half deduction allowed to Joe:

i) Meal : $410

ii) Entertainment : $ 310

Total : $ 720

50% thereof, that Joe can deduct : $ 360

Q(g)

Miles travelled on office work ( factory) totalling 200 Miles can be claimed as deduction. The distance travelled from residence to place of work and return totalling 78 mils cannot be claimed as deduction.

Standard rate that Joe can claim for every mile driven : $ 0.50 per mile.

Answer : Therefore, the amount that Joe can claim as deduction : 200 Miles * $ 0.50 per mile = $ 100

Q (h)

Joe's visit to his parent's house in Dallas is personal, and hence, he cannot claim this as business deduction.

However, he can deduct the amount spent on attending the business symposium, which is relevant to his business.

Therefore, Joe can deduct the following expenses:

i) Cost of business symposium : $ 130

ii) Meals during symposium : $ 114

iii) Cab fare to symposium : $ 68

Answer:The total deduction that Joe can make :$312