1. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 1 Federal Income Tax Business Related Deductions

2. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 2 Chapter 9 Travel and Transportation Automobile Expenses Entertainment Moving Expenses Education Expenses Home Office Reimbursements Hobby losses (from Chap 6)

3. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 3 Automobile Expenses Choose larger of –Actual costs (business use) –Standard mileage rate allowed

4. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 4 Automobile Expenses Business $.?? Moving Medical Charitable Contribution

5. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 5 Automobile Expenses Business $.565 pg 9 – 11 Moving Medical Charitable Contribution Note prev yrs’ amts: ’01 = $.345 ’02 = $.365 ’03 = $.36 ’04 = $.375 ’05 = $.405 $.485 ’06 = $.445 ’07 = $.485 ’08 = $.505 $.585 ’09 = $.55 ’10 = $.50 ’11 = $.51 $.555

6. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 6 Automobile Expenses Choose larger of –Actual costs (business use) –Standard mileage rate allowed Problem 9 – 54

7. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 7 Automobile Expenses Choose larger of –Actual costs (business use) –Standard mileage rate allowed Problem 9 – 57 StandardActual

8. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 8 Problem 9 - 57 Standard Business Miles24,000 x Std Rate$.565 Sub-total$13,560 Parking & Tolls 100 Total Std Mileage Allowance$13,650 Actual

9. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 9 Problem 9 - 57 Actual Gas & Oil$ 9,000 Repairs1,400 Depreciation4,700 Insurance & License 1,300 Total to Apportion$16,400 x Bus Use 60% Sub-total$ 9,840 Exp NOT Apportioned 100 Total ACTUAL Costs$ 9,940 Standard

10. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 10 Problem 9 - 57 Standard vs. Actual Total STANDARD Costs$13,650 Total ACTUAL Costs$ 9,940 Choose Larger$13,650 Less: Reimbursement 9,600 Deductible Amount$ 4,060

11. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 11 Chapter 9 Travel and Transportation Automobile Expenses Entertainment Moving Expenses Education Expenses Home Office Reimbursements Hobby losses (from Chap 6)

12. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 12 Entertainment Expenses “Directly Related” “Associated With” See page 9-14 Substantiation Not lavish or extravagant 50% Problem 9 - 19

13. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 13 Chapter 9 Travel and Transportation Automobile Expenses Entertainment Moving Expenses Education Expenses Home Office Reimbursements Hobby losses (from Chap 6)

14. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 14 Moving Expenses General Requirements –Must move 50 miles –Must stay in new location 39 weeks –Only “direct” expenses deductible

15. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 15 Moving Expenses Prior to 1981 –expenses classified as “direct” and “indirect” –“direct” costs fully deductible; limits on “indirect” costs –costs (in excess of reimbursement) deductible FOR A.G.I.

16. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 16 Moving Expenses 1981 – 1996 –direct and indirect costs deductible FROM –reimbursement included in Gross Income Present Law –only DIRECT costs deductible –costs deductible FOR A.G.I.

17. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 17 Moving Expenses 1981 – 1996 –direct and indirect costs deductible FROM –reimbursement included in Gross Income Present Law –only DIRECT costs deductible –costs deductible FOR A.G.I. Problem 9 – 62

18. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 18 Automobile Expenses Business $.565 pg 9 – 11 Moving $.?? Medical Charitable Contribution

19. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 19 Automobile Expenses Business $.565 pg 9 – 11 Moving $.24 pg 9 – 20 Medical Charitable Contribution Note prev yrs: $.12 in 2001 $.13 in 2002 $.12 in 2003 $.14 in 2004 $.15 $.22 in 2005 $.20 in 2007 $.19 in 2008 $.24 in 2009 $.165 in 2010 $.19 in 2011 $.235 $.23 in 2012

20. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 20 Automobile Expenses Business $.565 pg 9 – 11 Moving $.24 pg 9 – 20 Medical Charitable Contribution

21. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 21 Chapter 9 Travel and Transportation Automobile Expenses Entertainment Moving Expenses Education Expenses Home Office Reimbursements Hobby losses (from Chap 6)

22. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 22 Education Expenses Ways for education costs to be deductible: –Required by law –Required by employer –Maintain or improve skills Problem 9 – 25

23. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 23 Problem 9 - 25 CPA Review$ 400 Law School4,000 Continuing Education600 $5,000 $500 Deductible FROM – Tier 2 New trade or business personal

24. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 24 Education Expenses Ways for education costs to be deductible: –Required by law –Required by employer –Maintain or improve skills Problem 9 – 25 Problem 9 – 26

25. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 25 Problem 9 - 27 Teachers generally allowed? –Sometimes required by law or employer –Maintain and improve skills New trade or business? –elementary to secondary? –biology to art? –classroom to counselor? –teacher to principal?

26. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 26 Education Expenses Ways for education costs to be deductible: –Required by law –Required by employer –Maintain or improve skills Problem 9 – 25 Problem 9 – 26 Problem 9 – 63

27. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 27 Problem 9 - 65 a.Law school? Not deductible – new trade or bus b.Self-employed accountant? $1,800 FOR c.MBA for executive? $5,000 FROM, Tier 2 d.Graduate courses for teacher? $1,000 FROM, Tier 2 e.Bar review for recent grad? Not deductible – personal

28. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 28 Chapter 9 Travel and Transportation Automobile Expenses Entertainment Moving Expenses Education Expenses Home Office Reimbursements Hobby losses (from Chap 6)

29. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 29 Chapter 9 Travel and Transportation Automobile Expenses Entertainment Moving Expenses Education Expenses Home Office Reimbursements Hobby losses (from Chap 6)

30. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 30 Chapter 9 Travel and Transportation Automobile Expenses Entertainment Moving Expenses Education Expenses Home Office Reimbursements Hobby losses (from Chap 6)

31. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 31 Home Office Expenses Controversial

32. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 32 Home Office Expenses Controversial Requirements: –“exclusive use” –principal place of business (1998) –meetings with customers/clients etc. –separate structure? –“convenience of the employer”

33. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 33 Home Office Expenses Qualifications? Problem 9 – 28 –(do b, a, then c) What’s deductible?

34. http://www.irs.gov/pub/irs-pdf/p587.pdf Pub. 587 page 7

35. Publication 587, page 7 http://www.irs.gov/pub/irs-pdf/p587.pdf

36. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 36 What’s Deductible? Business Incomexxxx Less: Regular Business Expenses x Sub-Totalxxx Home Office Exp Deductible Anyway x Sub-Totalxx Less: Other Home Office Expensesx Net Incomex

37. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 37 See Sch C, page B-21 09

38. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 38 Form 8829

39. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 39 Home Office Expenses Qualifications? Problem 9 – 28 –(do b, a, then c) What’s deductible? Problem 9 – 65

40. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 40 Problem 9 – 65 Studio deductible? Den deductible?

41. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 41 Problem 9 – 65

42. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 42 Problem 9 – 65

43. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 43 Problem 9 – 65

44. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 44 Problem 9 – 65

45. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 45 Problem 9 – 65

46. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 46 Problem 9 – 65 (a)

47. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 47 Problem 9 – 65 (a)

48. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 48 Problem 9 – 65 (a)

49. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 49 Problem 9 – 65

50. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 50 Problem 9 – 65

51. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 51 Problem 9 – 65 Now What?

52. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 52 Problem 9 - 65 Income$40,000 Exp of Business2,000 Sub-total$38,000 Exp Ded Anyway700 Sub-total37,300

53. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 53 Problem 9 – 65

54. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 54 Problem 9 – 65 (b)

55. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 55 Problem 9 – 65

56. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 56 Problem 9 – 65 (a) Note: 90% of these deductible as itemized deductions.

57. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 57 Problem 9 – 65 (b)

58. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 58 Problem 9 – 65 (b) Income$2,500 Exp of Business2,000 Sub-total$ 500 Exp Ded Anyway Sub-total

59. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 59 Problem 9 – 65 (b)

60. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 60 Problem 9 – 65 (b)

61. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 61 Problem 9 – 65 (b) Income$2,500 Exp of Business 2,000 Sub-total$ 500 Exp Ded Anyway 700 Sub-total($ 200) Other Home Exp -0- Net Income (Loss)($ 200)

62. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 62 Problem 9 – 65 (b)

63. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 63 Problem 9 – 65 (b)

64. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 64 Problem 9 – 65 (b)

65. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 65 Problem 9 – 65 (b) Excess Direct Exp$200 10% of other Exp of Home???

66. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 66 Problem 9 – 65 (b)

67. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 67 Problem 9 – 65 (b) Carryover

68. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 68 Problem 9 – 65 (b) Excess Direct Exp$200 10% of other Exp of Home500 Carryover

69. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 69 Chapter 9 Travel and Transportation Automobile Expenses Entertainment Moving Expenses Education Expenses Home Office Reimbursements Hobby losses (from Chap 6)

70. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 70 Business Expenses Self-employed –“for” Employee –Reimbursed? Yes=“for” No=“from”

71. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 71 Reimbursements References –Text Table 9 - 2, page 9 - 18 –Publication 17, YFIT, Table 26 - 3 195

72. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 72 Plans Accountable Non-Accountable

73. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 73 Plans Accountable Non-Accountable Recommend Problem 9 - 13

74. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 74 Chapter 9 Travel and Transportation Automobile Expenses Entertainment Moving Expenses Education Expenses Home Office Reimbursements Hobby losses (from Chap 6)

75. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 75 Reimbursements Problem 9 - 54

76. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 76 Problem 9 – 54 In Textbook

77. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 77 Problem 9 – 54 Reimbursed $3,000 $5,000 60%

78. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 78 Problem 9 – 54

79. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 79 Problem 9 – 54

80. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 80 Problem 9 – 54

81. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 81 Problem 9 – 54

82. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 82 Problem 9 – 54

83. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 83 Problem 9 – 54

84. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 84 Problem 9 – 54 $200 $1,800

85. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 85 Text Page 9 – 47

86. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 86 Another Approach

87. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 87 4,000 1,000

88. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 88 Another Approach 4/5 = 80%1/5 = 20%

89. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 89 Another Approach 4/5 = 80%1/5 = 20%

90. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 90 Another Approach 4/5 = 80%1/5 = 20%

91. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 91 Another Approach

92. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 92 Another Approach

93. © Copyright 2001-2009 by M. Ray Gregg. All rights reserved. 93 Chapter 9 Travel and Transportation Automobile Expenses Entertainment Moving Expenses Education Expenses Home Office Reimbursements Hobby losses (from Chap 6) Itemized Deductions