Question

Rajiv, a self-employed consultant, drove his auto 20,000 miles this year, 15,000 to meetings with clients and 5,000 for commuting and personal use. The cost of operating the auto for the year was as follows:

Gasoline and repairs $7,000
Insurance 1,000
Depreciation 4,000

Rajiv's AGI is $100,000 before considering the auto costs. Rajiv has used the actual cost method in the past. What is Rajiv's deduction for the use of the auto after application of all relevant limitations?

A) $6,325
B) $8,325
C) $9,000
D) $7,000

Answer 1

Rajiv's deduction for the use of the auto after application of all relevant limitations is $9,000.

Step-by-step explanation:

Rajiv's deduction for the use of the auto after application of all relevant limitations can be calculated using the actual cost method. The deduction is based on the business use percentage of the total miles driven. In this case, Rajiv drove 20,000 miles, with 15,000 miles for business use. This means the business use percentage is 75%.

To calculate the deduction, we need to add up the total auto costs: $7,000 for gasoline and repairs, $1,000 for insurance, and $4,000 for depreciation. The total auto cost is $12,000.

Finally, we multiply the total auto cost by the business use percentage to get the deduction amount. $12,000 x 75% = $9,000.