1. Marty is an employee of Apricot, Inc. Marty incurs the following expenses rel

Question

1. Marty is an employee of Apricot, Inc. Marty incurs the following expenses related to entertainment of his clients in 2010: Dues to a country club $4,500 (The country club was used for business 25 days of the total 75 days that it was used.) Business meals at the country club 850 Dues to a tennis club 1,000 (The club was used 75 percent for directly related business.) Tennis fees (personal use) 260 Business meals at various restaurants 2,250 a. How much is Marty's deduction for entertainment expenses for 2010 (before the 2 percent of adjusted gross income limitation)? b. For each item above that you believe is not allowed as a deduction, explain the reason it is not allowed. 2. Margaret started her own business in the current year and will report a profit for her first year. Her results of operations are as follows: Gross income $50,000 Travel 1,000 Transportation 6,173 miles, using standard mileage method Entertainment in" total 4,000 Seven gifts at $50 each 350 Rent and utilities for apartment in total 10,000 (20% is used for a home office) What is the net income Margaret should show on her Schedule C? Show the cal-culation of her taxable business income.

Explanation / Answer

The answer to this is A) 850 + 2250 = $3100 B) The deductions for Tennis are not allowed as they are for personal use and not for business.

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