This year Clark leased a car to drive between his office and various work sites. Clark carefully recorded that he drove the car 23,000 miles this year and paid $7,200 of operating expenses ($2,700 for gas, oil, and repairs, and $4,500 for lease payments). What amount of these expenses may Clark deduct as business expenses?
A)$7,200
B)Clark cannot deduct these costs because taxpayers must use the mileage method to determine any transportation deduction.
C)$4,500
D)$2,700
E)Clark is not entitled to any deduction if he used the car for any personal trips.

Question

Quizplus · Accepted Answer

Clark can deduct the total amount of $7,200 as business expenses. This includes both the operating expenses ($2,700 for gas, oil, and repairs) and the lease payments ($4,500), as long as these expenses are related to the business use of the car. The IRS allows taxpayers to choose between the standard mileage rate and actual car expenses for business use of a vehicle. Since the question does not specify that Clark must use the mileage method, it is assumed he can deduct actual expenses.

This Year Clark Leased a Car to Drive Between His