An owner of an automobile body shop comes into your office for tax advice. He has...

An owner of an automobile body shop comes into your office for tax advice. He has been thinking about updating his antiquated computer system so he purchased a consumer handbook then he flew to San Francisco to visit the Apple Store to shop for computers for his personal and business use. He wants to deduct the trip, his food, the book, and the computer he purchased in San Francisco. How would you advise him regarding the deductions and expenses he may be able to claim? Make a recommendation regarding how these expenses should be treated to maximize his deductions. Be specific with your recommendation.

Expert Solution

The body shop owner is able to deduct some of his expenses but there are a few questions to ask him.

How long was the trip and did anyone go with him?
He mentioned that the trip was to shop for personal and business, how long did it take to get his business shopping done?

Personal expenditures cannot be deducted as business expenses. If he stayed over night, he can deduct 50% of his meals as long as he is consuming it and its while he is conducting business.
If the trip is less than a day, the travel is deductible but not the meals.
He can deduct the computer as a depreciation but only if he is using it for business purposes. If he uses it for personal use, it cannot be fully depreciated.
There are a lot of factors to consider that could cause the IRS to audit. If audited, the business owner will have to justify the deductions.

However if assumed the cinsumer handbook is used purely for business purpose:

Suggest him to capitalise these expenses as the procurring of fixed assests expesnes and take deduction as depriciation in Income Tax

As if the expenses get capitalise it will form the part of cost of assets and depriciation can be claimed on full amount of cost of assets

ekkarill92 answered 1 year ago

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