Mandy is an employee who must use her personal automobile for employment-related

Question

Mandy is an employee who must use her personal automobile for employment-related business trips. During 2017, Mandy drives her car 60% or business use and incurs he following total expenses (100% use of car): EEB Click the icon to view the expenses.) Mandy drives her car a total of 30,000 miles (18,000 business miles) during 2017 and receives a reimbursement of 30 cents per mile rom her employer Assume that an adequate accounting is made to Mandy's employer. Read the requirements Requirement a. What amount is deductible (before the 2% nondeductible floor) if Mandy uses the standard mileage method? If Mandy elects to use the standard mileage method the deduction from AGI (before the 2% nondeductible floor) is $ Requirement b. What amount is deductible (before the 2% nondeductible floor) if Mandy uses the actual cost method? If Mandy elects to use the actual cost method the deduction from AGI (before the 2% nondeductible floor) is $ Requirement c. Can taxpayers switch back and forth between the mileage and actual methods each year? O A. Although taxpayers are permitted to change from one method to another, there are specific requirements that must be met. A change from the actual method to the mileage method must reduce the basis of the automobile by the actual expenses incurred and the modified accelerated cost-recovery system (MACRS) method must be used in subsequent years. A change from the mileage method to the actual method is only permitted if the taxpayer used the modified accelerated cost-recovery system (MACRS) method of depreciation. O B. Taxpayers are permitted to change from one method to another with no restrictions. O C. Taxpayers are not permitted to change from one method to another. When one method is elected, that method must be used until the taxpayer disposes of the vehicle. O D. Although taxpayers are permitted to change from one method to another, there are specific requirements that must be met. A change from the mileage method to the actual method must reduce the basis of the automobile by a mileage rate and the straight line method must be used in subsequent years. A change from the actual method to the mileage method is only permitted if the taxpayer used the straight-line method of depreciation

Explanation / Answer

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ans a standard mileage method 18000*53.5 cents 9630 Add; Parking and toll 80 9710 Less; employer reimbursement (18000*.3) -5400 Deduction is $4,310 Ans b Actual method Expenses (excluding tolls andparking) $20,000 Used for business 60% $12,000 Add; Parking and toll 80 Total expenses are $12,080 Less; employer reimbursement (18000*.3) -5400 Deduction is $6,680 ans c Option D is correct.

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