1:9-82 Steve is part owner and manager of a small manufacturing company that mak

Question

1:9-82 Steve is part owner and manager of a small manufacturing company that makes keypads for alarm systems. The keypads are sold to several different alarm companies throughout the country. Steve must travel to several cities each year to meet with current customers and to attract new business. When you meet with Steve to obtain information to prepare his current year tax return, he tells you that he has spent about $5,000 during the cur rent year on airfare and taking his customers out to dinner to discuss business. Because he took most of his trips in the summer and fall, and it is now April of the following yea Steve cannot remember the exact time and places of the business dinners and did not re tain any receipts for the cash used to pay the bills. However, he remembers the names of the customers he went to see, the business topics that were discussed, and the restaurants where he had his meals. As Steve's tax consultant, what is your responsibility regarding the treatment of the travel and entertainment expenses under the mandates of the AICPA Statements on Standards for Tax Services? Prepare a client letter explaining to Steve the requirements under Sec. 274(d) for sufficient substantiation of travel and entertainment expenses. (See the Statements on Standards for Tax Services section in Chapter 1:15 for a discussion of these issues and Appendix E.)

Explanation / Answer

To Steve,

This is towards the requirement for the filing of your current year tax return. There you claimed an expense of $5000 towards travel and entertainment expenses towards the business, but not evidence has been provided for all these expenses.

As per the sec 274(d), all those expenses which are done for business purpose and related to the business towards the entertaining persons, should be accompanied with the sufficient evidence corroborating the a) The amount of the expense made b) the time and place of the expense made on travel, entertainment, amusement, the date and description of the gift provided. Log book should be provided if the personal vehicle is used for the business purpose traveling.

Thus, please provide all the evidences towards travelling and entertainment expenses so claimed, if you want to avail the credit.

Tax consultant

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.