The following facts pertain to Lewis Productions, a sole proprietorship owned by

Question

The following facts pertain to Lewis Productions, a sole proprietorship owned by Lewis, in the current year: cost of holiday gifts Total ven to top 10 clients (each gift identical) Lodging costs incurred by Lewis while traveling to client sites: Meal costs incurred by Lewis only while traveling to and from client sites: Meal costs incurred by Lewis while entertaining business clients $550 $3,000 $1,500 and engaging in some business-related discussion 3,0 Considering only the above facts, what is the total amount of business expenses Lewis can deduct on Schedule C of the current year's tax return? Oa. $5,500 Ob. $8,050 c. $5,800 Od. $5,050

Explanation / Answer

Ans: a. $5500

Explanation:

Business gifts are deductible, but are limited to $25 per gift resulting in a total deduction of $250 for the 10 gifts.

Lodging, when traveling for business purposes, is fully deductible, resulting in a deduction of $3,000.

Only 50% of meal costs are deductible, regardless if the meals were part of business travel or entertainment.

As a result, the total meals of $1500 + $3000 = 4500 would result in a deduction of $2,250. Deductible expenses would be $250 +$3000 + $2250 = $5500

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