Please answer the following questions

PARTA CHAP int, except as necessar 508 he restrictions set out meet flies it also contains DEDUCTIONS IN COMPUTING TAXABLE INCOME an employee's residence and place of employment, ex for the safety of the employee. 35 Substantiation and Reporting Requirements. The res above are substantial, but Section 274. goes even furth substantiation and reporting requirements. 36 The requirements generally involve travel expenses (bot domestic) including meals and lodging, gifts, and listed There are also separate reporting requirements concerning at conventions and seminars.39 The regulations under Secti have received judicial blessing, impose stringent docu requirements, normally necessitating a receipt for expendi $75.41 Insufficiency of reporting or substantiation can disallowance of deductions that might otherwise survive the take mechanism described above. The substantiation (both foreign and and listed property 38 cerning attendance der Section 274, which ont documentation for expenditures over os PROBLEMS 1. Businessperson incurs the following $ 162 business deductions. To extent does $ 274 limit their deductibility? (a) Businessperson takes Client to lunch and a ballgame and to Client's dismay, discusses business most of the time. (b) Businessperson takes an education course in another town incurring transportation, meals, and lodging expenses. (c) Businessperson purchases gifts costing $55 each for significant clients. (d) Businessperson purchases an airplane which is used 60 percent of the time for business travel and 40 percent of the time for client entertainment. (e) Businessperson provides employees with qualified parking which is excluded from their gross income under $ 132(a)(5). W. Newton v. Commissioner, travel status; William H. 36 L.R.C. $ 274(1)(1). However, in the case of any qualified bicycle communes reimbursement, such amount may be deducted, presumably because it is included employee's gross income. I.R.C. $ 274(1)(2). ** I.R.C. $ 274(d) and (h)(5). In the areas affected by I.R.C. $ 274 (but only those areas); $ 274(d) overrules the long-established Cohan rule. With respect to substantiation not within the scope of $274, the Cohan rule still applies. Ellery W. Newton v. 57 T.C. 245 (1971), business use of an automobile other than in a travel status, Green v. Commissioner, 31 T.C.M. 592 (1972), wagering losses. 37 See Rev. Rul. 75-169, 1975-1C.B 59. 38 I.R.C. $ 274(d). For listed property see I.R.C. $ 280F(a)(4) and Chap 39 I.R.C. $ 274(h)(5). 40 Sanford v. Commissioner, 412 F.2d 201 (2d Cir. 1969) cert. denied 396 U.S. 104 (1969); Robert H. Alter v. Commissioner. 50 T.C. 833 (1968); John Commissioner, 51 T.C. 520 (1968), affirmed per curiam (this issue) 422 F.2d 873 The Fifth Circuit has ruled that each and every element of each expenditure mus substantiated. Dowell v. United States, 522 F.2d 708 (5th Cir Sanford case by Aaron, "Suhaton lenied 396 U.S. 841,90 S.Ct. 968); John Robinson v. F.2d 873 (9th Cir. 1970). aditure must be adequately omment on the 519 RESTRICTIONS ON DEDUCTIONS PART 4 CHAPTER 17 at points "S: PROBLEM the om - is ner ty Goggle, who owns a successful high-tech start-up business, develops an erest in winemaking. Goggle purchases land in neighboring wine country and buys a home and land surrounding it and grows grapes on the land. Derrettably, Goggle's grape-growing endeavors are not as successful as the Whatech endeavors. Goggle has net losses in each of the first two years of grape-growing operations. In the third year, Goggle earns $55,000 from sales of grapes, but Goggle also incurs $10,000 of property taxes, $15,000 of interest on a mortgage on the property, $20,000 of salaries, $20,000 in other operating expenses, and $15,000 of depreciation. Discuss the deductibility of Goggle's expenses under $ 183 in year three. ty D. RESTRICTIONS ON DEDUCTIONS OF HOMES Internal Revenue Code: Sections 280A(a), (b), (c)(1), (3), and (5), (d)(1). (e), (f) and (g). ing an ion is urrent it. If eless perly t the hare bby as to ners ment e of ers nd- Prior to 1976 the rules of Section 183, discussed above, were applicable in determining the extent of deductibility of expenses incurred in connection with the then-popular tax shelter device of vacation or second homes1 In 1976 Congress became concerned with the overall aspects of the deductibility of items related to a home used by a taxpayer both for business or investment and for residential purposes. In the Tax eform Act of 1976 Congress responded to that concern by enacting ection 280A which provides specific rules limiting deductions on homes. The rules of Section 280A and Section 1833 apply to the same axpayers and both sections impose similar limitations on deductions. wever, Section 280A applies in circumstances different from those to ich Section 183 applies. With respect to vacation or second homes the missioner may assert the rules of Section 183 to limit deductions for taxable years to which the limitations of Section 280A do not apply 5 ely ars Commissioner me PARTA CHAP int, except as necessar 508 he restrictions set out meet flies it also contains DEDUCTIONS IN COMPUTING TAXABLE INCOME an employee's residence and place of employment, ex for the safety of the employee. 35 Substantiation and Reporting Requirements. The res above are substantial, but Section 274. goes even furth substantiation and reporting requirements. 36 The requirements generally involve travel expenses (bot domestic) including meals and lodging, gifts, and listed There are also separate reporting requirements concerning at conventions and seminars.39 The regulations under Secti have received judicial blessing, impose stringent docu requirements, normally necessitating a receipt for expendi $75.41 Insufficiency of reporting or substantiation can disallowance of deductions that might otherwise survive the take mechanism described above. The substantiation (both foreign and and listed property 38 cerning attendance der Section 274, which ont documentation for expenditures over os PROBLEMS 1. Businessperson incurs the following $ 162 business deductions. To extent does $ 274 limit their deductibility? (a) Businessperson takes Client to lunch and a ballgame and to Client's dismay, discusses business most of the time. (b) Businessperson takes an education course in another town incurring transportation, meals, and lodging expenses. (c) Businessperson purchases gifts costing $55 each for significant clients. (d) Businessperson purchases an airplane which is used 60 percent of the time for business travel and 40 percent of the time for client entertainment. (e) Businessperson provides employees with qualified parking which is excluded from their gross income under $ 132(a)(5). W. Newton v. Commissioner, travel status; William H. 36 L.R.C. $ 274(1)(1). However, in the case of any qualified bicycle communes reimbursement, such amount may be deducted, presumably because it is included employee's gross income. I.R.C. $ 274(1)(2). ** I.R.C. $ 274(d) and (h)(5). In the areas affected by I.R.C. $ 274 (but only those areas); $ 274(d) overrules the long-established Cohan rule. With respect to substantiation not within the scope of $274, the Cohan rule still applies. Ellery W. Newton v. 57 T.C. 245 (1971), business use of an automobile other than in a travel status, Green v. Commissioner, 31 T.C.M. 592 (1972), wagering losses. 37 See Rev. Rul. 75-169, 1975-1C.B 59. 38 I.R.C. $ 274(d). For listed property see I.R.C. $ 280F(a)(4) and Chap 39 I.R.C. $ 274(h)(5). 40 Sanford v. Commissioner, 412 F.2d 201 (2d Cir. 1969) cert. denied 396 U.S. 104 (1969); Robert H. Alter v. Commissioner. 50 T.C. 833 (1968); John Commissioner, 51 T.C. 520 (1968), affirmed per curiam (this issue) 422 F.2d 873 The Fifth Circuit has ruled that each and every element of each expenditure mus substantiated. Dowell v. United States, 522 F.2d 708 (5th Cir Sanford case by Aaron, "Suhaton lenied 396 U.S. 841,90 S.Ct. 968); John Robinson v. F.2d 873 (9th Cir. 1970). aditure must be adequately omment on the 519 RESTRICTIONS ON DEDUCTIONS PART 4 CHAPTER 17 at points "S: PROBLEM the om - is ner ty Goggle, who owns a successful high-tech start-up business, develops an erest in winemaking. Goggle purchases land in neighboring wine country and buys a home and land surrounding it and grows grapes on the land. Derrettably, Goggle's grape-growing endeavors are not as successful as the Whatech endeavors. Goggle has net losses in each of the first two years of grape-growing operations. In the third year, Goggle earns $55,000 from sales of grapes, but Goggle also incurs $10,000 of property taxes, $15,000 of interest on a mortgage on the property, $20,000 of salaries, $20,000 in other operating expenses, and $15,000 of depreciation. Discuss the deductibility of Goggle's expenses under $ 183 in year three. ty D. RESTRICTIONS ON DEDUCTIONS OF HOMES Internal Revenue Code: Sections 280A(a), (b), (c)(1), (3), and (5), (d)(1). (e), (f) and (g). ing an ion is urrent it. If eless perly t the hare bby as to ners ment e of ers nd- Prior to 1976 the rules of Section 183, discussed above, were applicable in determining the extent of deductibility of expenses incurred in connection with the then-popular tax shelter device of vacation or second homes1 In 1976 Congress became concerned with the overall aspects of the deductibility of items related to a home used by a taxpayer both for business or investment and for residential purposes. In the Tax eform Act of 1976 Congress responded to that concern by enacting ection 280A which provides specific rules limiting deductions on homes. The rules of Section 280A and Section 1833 apply to the same axpayers and both sections impose similar limitations on deductions. wever, Section 280A applies in circumstances different from those to ich Section 183 applies. With respect to vacation or second homes the missioner may assert the rules of Section 183 to limit deductions for taxable years to which the limitations of Section 280A do not apply 5 ely ars Commissioner me