Question

pastor Martin received 40.000 in ministerial earnings .28.000 salary for ministerial services. 2.000 for performing weddings .and 10.000 tax free personage allowance. pastor Martin incurred 5.000 of unreimbursed expenses connected with his ministerial earnings .4.500 related to his ministerial salary and 500 related to weddings performed as self employed. how much of the expenses related to his self employed earnings is deductible when figuring net income for income tax after allocation to the tax free percentage allowance
1.$125
2$375
3$500
4$5.000

Answer 1

Answer:

Correct answer is:

2. $375

Explanation:

Pastor Martin received $40.000 in ministerial earnings consisting of:

• $28.000 salary for ministerial services
• 2.000 for performing weddings .and
• 10.000 tax free personage allowance.

Martin incurred $5.000 of unreimbursed expenses out of which $500 related to weddings performed as self-employed.

The nondeductible portion of expenses related to Rev. Schmidt's wedding income is = (Tax-free allowance / total earnings) * Expense related to weddings performed as self employed = (10,000 /40,000) * 500 = $125

As such amount of expenses related to his self-employed earnings which is deductible = $500 - $125 = $375