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part 1

David, a CPA for a large accounting firm, works 10- to 12-hour days. As a requirement for his position, he must attend social events to recruit new clients. In addition to his job with the accounting firm, he also has private clients in his unincorporated professional practice. David purchased exercise equipment for $3,000. He works out on the equipment to maintain his stamina and good health that enable him to carry such a heavy workload. What tax issues should David consider? Please cite IRC code at least once.

part 2  I need a question or observation to say ask or tell to a fellow student who posted the answer below to the same question. It only needs to be 2 or 3 sentences long.

 

Betty said:

David should consider the substantiation of the expenses that he incurs when he must attend social events for his employer.01 Section 162(a) allows a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including certain expenses for meals and entertainment.If you are an employee and have ordinary and necessary business-related expenses for travel away from home, local transportation, entertainment, and gifts, you may be able to deduct these expenses. Generally, you must file Form 2106 or Form 2106-EZ to claim these expenses.

IRC Section 274(d) and Treas. Regs. Section 1.274-5 also provide for full disallowance of meals, entertainment and lodging expenses unless the taxpayer can substantiate the business purpose of the expenditure. The following details must be documented for each lodging and other expenditures in excess of $75:1) the amount of expense 2) the time and place of the meal, entertainment, etc. 3) the business purpose of the expenditure and  4) the business relationships of those in attendance. In regards to his own business he needs to keep separate records from his regular job. He may consider taking the in home office deduction on Form 8829.

To be tax deductible, an office in the home, unless it is in a separate structure, must be used as either the principle place of business or as a place of business used to meet customers, clients, or patients in the normal course of business.  In all cases, the office in the home must be used exclusively for business and on a regular basis for these purposes.  An employee can only qualify if the business use is for the convenience of the employer. Section 280 A.

In regards to the $3,000 treadmill David cannot take it as a medical expense unless he gets a doctor’s note indicating that he needs the treadmill for a medical reason such as obesity or a heart problem. He would record it on Schedule A subject to a 10% ceiling of AGI (2013).

 

part 3

Wayne and Maria file a joint tax return on which they itemize their deductions and report AGI of $50,000. During the year, they incurred $1,500 of medical expenses when Maria broke her leg. Furthermore, their dentist informed them that their daughter, Alicia, needs $3,000 of orthodontic work to correct her overbite. Wayne also needs a new pair of eyeglasses that will cost $300. What tax issues should Wayne and Maria consider?

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