Joline works as a sales manager for the Washington Manufacturing Company.Although the company has an accountable reimbursement plan,as a cost containment measure the company will only reimburse its sales personnel for 80% of their business expenses.During the year,Joline incurred the following business expenses:
$$\begin{array} { l r }
\text { Airfare } & \$ 3,000 \
\text { Hotels } & 3,700 \
\text { Meals } & 1,200 \
\text { Entertainment } & 1,000
\end{array}$$
If Joline's adjusted gross income is $62,000,what amount can Joline deduct as a miscellaneous itemized deduction?

Question

Joline works as a sales manager for the Washington Manufacturing Company.Although the company has an accountable reimbursement plan,as a cost containment measure the company will only reimburse its sales personnel for 80% of their business expenses.During the year,Joline incurred the following business expenses:
$$\begin{array} { l r } 
\text { Airfare } & \$ 3,000 \
\text { Hotels } & 3,700 \
\text { Meals } & 1,200 \
\text { Entertainment } & 1,000
\end{array}$$
If Joline's adjusted gross income is $62,000,what amount can Joline deduct as a miscellaneous itemized deduction?

Quizplus · Accepted Answer

Under the accountable plan, Joline can only deduct the unreimbursed portion of her expenses. She is reimbursed for 80% of her expenses, so she can deduct 20% of her expenses. Total expenses are $8,900, so 20% is $1,780. However, meals and entertainment are subject to a 50% limitation, so only $1,100 of meals and entertainment ($2,200 total) is deductible. Therefore, the deductible amount is $1,780 - $1,100 = $680. Since miscellaneous itemized deductions are subject to a 2% AGI floor, $680 - $1,240 (2% of $62,000) = $0. Therefore, the correct answer is $320, which is the deductible amount after applying the 2% AGI floor.

Joline Works as a Sales Manager for the Washington Manufacturing