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    Deductible Unreimbursed Employee Expenses

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    In the current year, Mary incurs $3,600 of unreimbursed employment-related travel and entertainment expenses. These expenses include the following:
    Airfare $1,500
    Taxi fare 100
    Meals eaten alone while away from home on business 300
    Laundry 50
    Lodging 650
    Business meals with customers at which business is discussed 500
    Entertainment of customers 500
    Total $3,600

    Mary also pays $1,000 of investment counseling fees and $500 of tax return preparation fees in the current year. Mary's AGI is $70,000.

    a. What is the total amount of Mary's deductible expenses?
    b. Are the deductible expenses classified as for AGI or from AGI?

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    Solution Preview

    a. What is the total amount of Mary's deductible expenses?

    IRC section 162(a)(2) states that "There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including ... traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business." IRC section 274(n)(1) states that "The amount allowable as a deduction under this chapter for ... any expense for food or beverages, and ... any item with respect to an activity which is of a type generally considered to constitute entertainment, amusement, ...

    Solution Summary

    Citing specific Internal Revenue Code provisions, this solution discusses the deductibility of various unreimbursed employment-related costs.