Question

In the current year, Chastain takes a trip from Charleston, South Carolina to France primarily for business purposes. He is away from home from March 5 through March 16. He spends four days vacationing and eight days (including two travel days) conducting business. His airfare is $2,900, his meals amount to $180 per day, and lodging and incidental expenses are $420 per day. He is self-employed. In your computations, round any division to two decimal places and use rounded amounts in subsequent calculations. Chastain's deductible expenses are:Plane and taxi expenses: $ _________.Lodging and incidental expenses: $ ___________.Meals: $ _________.

Answer 1

Plane and taxi expenses - $1,943

Lodging and incidental expenses - $3,360

Meals expenses - $720

Step-by-step explanation:

Certain business expenses are fully deductible limited to the amount used for business purpose. Some such expenses are travel expenses (air or roadways), lodging and other commutation charges. Expenses on meals are 50 percent deductible.

Chastin spends 4 days vacationing. So expenses incurred during that time are not deductible under business expenses.

He was conducting business for 8 days. Proportional amount of plane and taxi expenses will be deductible under business expenses as calculated below:

Plane and taxi expenses (Proportion for business) = 8 / 12 = 0.67

12 are total number of days for which expenses were incurred and 8 out of 12 days were for business purpose.

Deductible Plane and taxi expenses = 0.67 × 2,900 = $1,943

Lodging and incidental expenses = $420/day

Deductible lodging and incidental expenses = 420 × 8 = $3,360

Meals expenses = $180/day

Deductible meal expenses = 180 × 8 × 0.5

= $720

Only 50% of meals expenses are deductible under business expenses.