Question

Kim works for a clothing manufacturer as a dress designer. During 2019, she travels to New York City to attend five days of fashion shows and
then spends three days sightseeing. Her expenses are as follows:

Airfare $1,500

Lodging (8 nights) $1,920

Meals (8 days) $1,440

Airport transportation $120

[Assume that lodging/meals are the same amount for the business and personal portion of the trip ($240 per day for lodging and $180 per day for meals).]

a. Presuming no reimbursement, how much can Kim deduct as to the trip?

b. Would the tax treatment of Kim’s deduction differ if she was an independent contractor (rather than an employee)? Explain

Answer 1

Calculation:

a)

Kim's deductible expenses

Particulars	Amount	Explanation
Airfare	1500	Because its greater than 50% so it’s primarily for business.
Lodging	1200	5 days * $ 240
Meals	450	(5 days * $180) *50% (50% cutback rule on meals)
Transortation	120	Because its greater than 50% so it’s primarily for business.
TOTAL	3270

Working Notes: Business days are 5 and total days is 8 , So tie spend in business is (5/8) =>62.5%

b)

The deductible expenses would be $3,270 and the expenses would be classified as a deduction for AGI