Freddie owns an electronics outlet in
Houston. This year, he paid $600 to register
for a four-day course in management in
Oklahoma City. Freddie paid $800 in airfare
and $1,000 for five nights' lodging. After the
course, Freddie spent the last day sightseeing.
During the trip, Freddie also paid $140 a day
for meals, and $80 a day for a rental car. What
amount of these travel expenditures may
Freddie deduct as business expenses?
To determine the amount of travel expenditures that Freddie may deduct as business expenses, we need to consider the IRS rules for business travel deductions.
According to the IRS, travel expenses must be "ordinary and necessary" business expenses to be deductible. This means that they must be common and accepted in Freddie's trade or business and must be helpful and appropriate for his business.
Based on the given information, we can calculate the total travel expenses for Freddie as follows:
Airfare: $800
Lodging: $1,000
Meals: ($140 per day x 5 days) = $700
Rental car: ($80 per day x 5 days) = $400
Course registration: $600
Total travel expenses = $3,500
To determine the deductible amount, we need to subtract any personal expenses that Freddie incurred during the trip. The sightseeing on the last day is likely a personal expense and not deductible for business purposes.
So, the deductible amount would be:
Total travel expenses - Personal expenses
$3,500 - $140 (last day sightseeing) = $3,360
Therefore, Freddie may deduct $3,360 of his travel expenditures as business expenses.