The following additional information is available for the Albert and Allison Gaytor family from Chapters 1 and 2. On September 1, Allison opened a retail store that specializes in sports car accessories. The name of the store is “Toge Pass.” The store is located at 617 Crandon Boulevard, Key Biscayne, FL 33149. The store uses the cash method of accounting for everything except inventory which is kept on an accrual basis. The store’s EIN is 98-7321654. Allison purchased inventory in August and thus started her business on September 1 with $40,100 of inventory. The Toge Pass accountant provided the following financial information:
A review of the expense account detail reveals the following:
The travel expense includes the costs Allison incurred to attend a seminar on sports car accessories. She spent $300 on airfare, $400 on lodging, $90 on a rental car, and $150 on meals. Allison has proper receipts for these amounts.
The gift account details show that Allison gave a $30 gift to each of her six best suppliers.
The supplies expense account detail reflects the purchase of 250 pens with the “Toge Pass” logo inscribed on each pen. Allison gave the pens away to suppliers, customers, and other business contacts before the end of the year.
Uniforms expense reflects the cost to purchase polo shirts Allison provided for each employee (but not herself). The shirts have the Toge Pass logo printed on the front and back and are the required apparel while working but otherwise are just like any other polo shirts.
The license and fee account includes a $900 fine Toge Pass paid to the state of Washington for environmental damage resulting from an oil spill.
Allison drove her 2010 Ford Explorer 1,701 miles for business related to Toge Pass. The Explorer was driven a total of 11,450 miles for the year. Included in the total 11,450 miles is 5,000 miles spent commuting to the store. Allison has the required substantiation for this business mileage. She uses the standard mileage method. In July, Albert loaned a friend $7,000 so he could buy a car. Albert’s friend lost his job in 2018 and stopped making payments on the loan. He plans to start making payments again, however, with additional interest as soon as he has new employment. In late 2018, Albert started to mount and stuff some of his trophy fish to display in his “man cave” at the Gaytor’s home. Some of his friends liked Albert’s taxidermy work and asked him to prepare a couple of trophy fish for them as well. Although he doubts he will ever sell any more stuffed fish, he was paid $150 and had no expenses related to this activity in 2018.
Combine this new information about the Gaytor family with the information from Chapters 1 and 2 and complete a revised 2018 tax return for Albert and Allison. Be sure to save your data input files since this case will be expanded with more tax information in later chapters.