Question

Taxpayer operates a business as a sole proprietor. During the year, Taxpayer incurred the following expense in operating that business. Determine the total business expense deduction to which Taxpayer is entitled after all applicable limitations.

Employee salary - $15,000
Payroll taxes - $1,500
Lunch with a client - $250
Ticket to Superbowl with best client - $3,500
Contribution to the mayor's re-election campaign - $500
Cell phone bill of Taxpayer's son, who does not work at business - $750

Answer 1

Based on the information available in the question, we can calculate the total business expense deduction as follows:-

Employee Salary - $15,000

Payroll Taxes - $1,500

Lunch with a client (50% deductble - $250 * 50%) - $125

Total Deductible expenses = $16,625

The ticket to superbowl with best client is not deductible as entertainment expenes are no longer deductible. The Contribution to the mayor's re-election campaign is also not deductible as political contributions are not deductible. Further, the cell phone bill of Taxpayer's son who does not work at business does not constitute a valid business expense.

Hence, the total deductible business expense per the calculation above is $16,625.