Question & Answer: Kweisi incurs the following employment-related expenses during the year:…..

Itemized Deductions (LO. 4)

Kweisi incurs the following employment-related expenses during the year:

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Question & Answer: Kweisi incurs the following employment-related expenses during the year:…..
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Airfare $1,880
Lodging 1,480
Meals 1,320
Entertainment 640
Incidentals 500

His employer maintains an accountable reimbursement plan and reimburses him $4,365 for his expenses. He also has $1,600 of other allowable miscellaneous expenses.

Note: Round your answers to the nearest whole dollar.

a. If his adjusted gross income is $53,700 then his allowable deduction is $.

b. Assume the same facts as in part a, except that Kweisi’s employer has a nonaccountable reimbursement plan and Kweisi receives $4,365 from the plan to pay for his business expenses. His allowable deduction is

Expert Answer

 

  1. adjusted gross income : $53,700
$
Airfare $1,880
Lodging $1,480
Meals $1,320
Entertainment $640
Incidentals $500
Total expenses $5,820
Reimbursed expenses $4,365
Unreimbursed portion $1,455
% of unreimbursed portion 25%
($1435/$5820)
Kwesi is subjected to 50% limit on meals and
entertainment for itemized deductions
$ $
Airfare $1880*25% $470
Lodging $1480*25% $370
Meals $1320*25%*50% $165
Entertainment $640*25%*50% $80
Incidentals $500*25% $125
Unreimbursed employee expense $1,210
Add: Miscellaneous itemized deductions $1,600
Allowable miscellaneous deductions $2,810
Less: 2%*$53700 $1,074
Allowable itemized deduction $1,736

b.

If the plan is unaccountable
If the plan is unaccountable, reimbursement should be included in gross income
($53700+$4365)= $58065
Expenses are deducted as itemized deductions subject to 50% deduction on meals and entertainment
Kwesi can deduction costs only subject to 2% adjusted gross income limitation
$
Airfare $1,880
Lodging $1,480
Meals (1320*50%) $660
Entertainment (640*50%) $320
Incidentals $500
Total Itemized deduction $4,840

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