Question

Michelle operates several food trucks. Indicate the amount (if any) that she can deduct as an ordinary and necessary business deduction in each of the following situations. (Leave no answers blank. Enter zero if applicable.) Problem 9-46 Part-a (Algo) Michelle moves her food truck between various locations on a daily rotation. Last week, Michelle was stopped for speeding. She paid a fine of $215 for speeding plus $170 for legal advice in connection with the ticket.

Answer 1

Michelle can deduct $215 as an ordinary and necessary business expense for the speeding fine. However, the $170 spent on legal advice is not deductible as a business expense in this situation.

Step-by-step explanation:

In this scenario, the amount Michelle paid for the speeding fine, which directly relates to the operation of her food truck, qualifies as an ordinary and necessary business expense. This is because it is a cost incurred in the course of carrying out the business activities. Michelle can deduct the full amount of the speeding fine, which is $215, as a business expense on her tax return.

On the other hand, the $170 spent on legal advice in connection with the speeding ticket does not qualify as an ordinary and necessary business expense. Legal expenses related to personal matters, such as traffic violations, are generally not deductible as business expenses. The legal advice does not directly pertain to the ordinary operation of the food truck business, so it cannot be claimed as a deductible expense.

It is crucial for business owners like Michelle to carefully distinguish between personal and business expenses to ensure accurate tax reporting. Keeping proper records and understanding the tax regulations related to business deductions helps in maximizing legitimate deductions and complying with tax laws.