Answer the following statements true (T) or false (F)

Question

1. Taxpayers may use the standard mileage rate method when five vehicles are used simultaneously for business.
2. If the standard mileage rate is used in the first year, the actual expense method may not be used in future years.
3. A taxpayer goes out of town to a business convention. The 50% reduction applies to the cost of food, entertainment and transportation expenses.
4. A self-employed consultant takes a client to dinner to propose a new consulting engagement. Assuming appropriate documentation is maintained, the individual will receive a deduction for AGI for 50% of the meal cost.
5. A self-employed consultant takes a client to a major league football game to propose a new consulting engagement. Assuming appropriate documentation is maintained, the individual will receive a deduction for AGI for 50% of the ticket cost.

Answer 1

1. FALSE
When multiple vehicles are used simultaneously for business, the standard mileage method is only allowed when four or fewer vehicles are in service.
2. FALSE
A taxpayer can switch to the actual cost method, but basis adjustments are required.
3. FALSE
The 50% reduction does not apply to transportation expenses, and entertainment expense is not deductible.
4. TRUE
Business meals are deductible for self-employed individuals, but a 50% reduction is applied to the cost.
5. FALSE
Entertainment expense is no longer deductible.