Required information The following information applies to the questions displaye

Question

Required information The following information applies to the questions displayed below. Ryan is self-employed. This year Ryan used his personal auto for several long business trips. Ryan paid $1,630 for gasoline on these trips. His depreciation on the car if he was using it fully for business purposes would be $3,900 During the year, he drove his car a total of 13,200 miles (a combination of business and personal travel). (Do not round intermediate calculations. Round your final aswer to the nearest dollar amount.) a. Ryan can provide written documentation of the business purpose for trips totaling 2,640 miles. What business expense amount can Ryan deduct (if any) for these trips? Maximum deductible amount

Explanation / Answer

a) Ryan can deduct either the actual expenses for business purposes or the standard rate per mile driven for business purposes. The standard rate for 2017 is 53.5 cents per mile driven for business purposes.

Actual Expenses = Gasoline Exp.+[Depreciation*(Miles driven for business/Total miles driven)]

= $1,630+[$3,900*(2,640/13,200)] = $1,630+$780 = $2,410

Standard Expenses = 2,640 miles*0.535 per mile = $1,412

Ryan can deduct either $2,410 or $1,412 as deduction but the maximum amount he can claim is $2,410.Therefore the maximum deductible amount is $2,410 (i.e. actual expenses as it is more than standard expenses)

b) In this case the gasoline expenses can be deducted by him only for the miles for which he can provide written documentation. (i.e. for 1,020 miles out of total 1,820 miles). The actual expenses allowed to him is calculated as follows:-

Actual Expenses = [$3,900*($1,020/13,200)]+[$1,630*($1,020/1,820)]

= $301+$914 = $1,215

Standard Expenses = 1,020 miles*$0.535 per mile = $546

The maximum deduction allowed is $1,215.

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