Question

Farm Boy uses a truck exclusively for business. He drove it 15,000 miles during the tax year. Oil, gas, lubrication, and repairs for the year cost $1,100. He incurred $50 in parking fees. His insurance, license and, registration was $700 for the year. Depreciation on the truck for this year is $900. Farm Boy needs the largest automobile expense tax deduction possible. He must decide whether to use the automatic mileage method or the actual cost method to generate the best deduction. The greatest automobile expense deduction is

1)	Obtained using the automatic mileage method.

2)	$1,100 actual cost

3)	$1,850 actual cost.

4)	$2,750 actual cost.

5)

$1,150 actual cost.

For tax purposes travel includes all of the following expenses incurred while temporarily away from home on business except which of the following.

1)	Dry cleaning for work work shirts cleaned while away from home on business.

2)	Airplane tickets to get to and from business travel destination.

3)	Car rental used for business purposes while away from home on business.

4)	Lavish hotel suite to stay in while away from home on business.

4)	Daily meals while away from home on business.

Which of the following expenses are not deductible education expenses in a business?

1)	Fred takes continuing education classes to maintain his CPA license for his tax practice.

2)	Milly, who has a tax advisory practice, incurs cost to attend courses on specialized tax law at a local law school.

3)	All of the above are deductible business education expenses.

4)	Mark, a CPA, who manages his business, takes MBA classes to improve his skills of managing his practice.

5)	Janice incurs several thousands of dollars in cost to prepare for and sit for the CPA exam, which she needs to pass to perform her business services.

Answer 1

1. Answer is 1) Obtained Using Automatic Mileage Method

It is because since the Car has been used exclusively for the business purposes, the Automatic Mileage Method will allow 54.5 Cents/per mile deduction over the Total Miles travelled which will give higher deduction.

2. Answer is 4.) Lavish hotel suite to stay in while away from home on business.

It is bacause all other expenses are deductible like travelling in car, plane, train, laundry expenses, meals etc.

3. Answer is 3) All of the above are deductible business education expenses.

As work related education expenses are allowable deduction.