Ryan is self-employed. This year Ryan used his personal auto for several long business trips. Ryan paid $1,920 for gasoline on these trips. His depreciation on the car if he was using it fully for business purposes would be $3,900. During the year, he drove his car a total of 20,200 miles (a combination of business and personal travel). (Round your final answers to the nearest whole dollar amount.) Required:
a. Ryan can provide written documentation of the business purpose for trips totaling 3,700 miles. What business expense amount can Ryan deduct (if any) for these trips?
b. Ryan estimates that he drove approximately 2,220 miles on business trips, but he can only provide written documentation of the business purpose for trips totaling 1,400 miles. What business expense amount can Ryan deduct (if any) for these trips?

a. $2,634.36

$1,481.11

Explanation:

a. Ryan can claim the direct costs of the trip being gasoline and oil. He can therefore claim the $1,920 he paid for gasoline.

In addition, some of the indirect costs can be claimed as well such as depreciation. The claim is calculated as:

= Depreciation amount * Business miles / Total miles driven

= 3,900 * 3,700 / 20,200

= $714.36

Total deduction = 1,920 + 714.36

= $2,634.36

b. Ryan needs to be able to prove that the cost he is claiming are indeed business expenses. Total deductibles are:

= (3,900 * 1,400/ 20,200) + (1,400/2,220 * 1,920)

= $1,481.11

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