Are any of the following items deductible on an individual’s income tax return?
ID: 2792518 • Letter: A
Question
Are any of the following items deductible on an individual’s income tax return? If so, is the item deductible ‘for’ or ‘from’ AGI? Explain your answer to each item: a. Payment of a $100 speeding fine related to the individual’s Schedule C business. b. A cost of $345 for having a federal income tax return prepared by a CPA. c. A legal fee of $2,500 for estate planning advice of which 50% was related to tax planning Are any of the following items deductible on an individual’s income tax return? If so, is the item deductible ‘for’ or ‘from’ AGI? Explain your answer to each item: a. Payment of a $100 speeding fine related to the individual’s Schedule C business. b. A cost of $345 for having a federal income tax return prepared by a CPA. c. A legal fee of $2,500 for estate planning advice of which 50% was related to tax planning Are any of the following items deductible on an individual’s income tax return? If so, is the item deductible ‘for’ or ‘from’ AGI? Explain your answer to each item: a. Payment of a $100 speeding fine related to the individual’s Schedule C business. b. A cost of $345 for having a federal income tax return prepared by a CPA. c. A legal fee of $2,500 for estate planning advice of which 50% was related to tax planningExplanation / Answer
a). Answer :- Fine amounting to $ 100 is not deductible expense on the income tax return of individual.
Explanation :- Fines are penalties which are not allowed as deduction while filing the income tax return.
b). Answer :- Cost of $ 345 paid to Certified Public Accountant (CPA) for preparing the income tax return is deductible expense.
Explanation :- The amount of $ 345 paid to CPA for the preparation of tax return of an individual is deductible from AGI as miscellaneous itemized deduction.
c). Answer :- Deductible legal fees = 2500 * 50 % = $ 1250.
Explanation :- Only 50 % of total legal fees ($ 2500) is deductible from AGI as the miscellaneous itemized deduction in the above given question.
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