Question

Phillip is actively engaged in the oil business and owns numerous oil leases in the Southwest. During the current year he made several trips to inspect oil wells on the leases and to consult about future oil wells to be drilled on these sites. As a result of these overnight trips, he paid the following:

Plane fares $4,000
Hotels 1,000
Meals 800
Entertaining lessees 500

Of the $6,300 in expenses incurred, he can claim as deductible expenses:

a. $6,300
b. $6,040
c. $5,650
d. $5,000

Answer 1

c. $5,650

Step-by-step explanation:

When traveling for business trips the meals and entertaining lessees are paid 50 % by the business and 50 % by the employee according to the IRS.

The plane fares and the hotel lodging bills are apid by the company.

Philip can claim deductible expenses = Plane fares+ Hotels+ 50% of Meals + 50 % of Entertaining lessees

Deductible Expenses = $ 4000+ $ 1000 + 50% (800) + 50% (500)

Deductible Expenses = $ 4000+ $ 1000 + 400 + 250 = $ 5650

Philip can claim $ 5650 as deductible expenses.

Answer 2

$6300 ( A )

Step-by-step explanation:

Total expenses made = plane fares + hotels + meals + entertaining leases

$4000 + $1000 + $800 + $500 = $6300

All the expenses incurred by Philip on his travels can be claimed as deductible expenses because the expenses were made as a result of Philips travel on behalf of the company and not on personal trips .

Therefore when he returns from the trip all expenses he incurred will be claimed as deductibles