Amos is a computer consultant, and his office is located in Orange, California. He and his wife, Susan, used their Lear jet, which they had purchase for $2 million, to travel to their timber farm in Oregon (10 trips), to their Tahiti property (2 trips), to computer symposia (5 trips), and to Park City, Utah (8 trips). The timber farm is operated in a businesslike fashion. Amos and Susan have spent nearly $2 million remodeling the Tahiti house and related property. They travel to Tahiti twice a year and stay there for several weeks each time. They travel to Park City to go skiing. The annual costs of operating the Lear jet, including depreciation, are $700,000 (assume $200,000 of this is depreciation).
On their tax return, Amos and Susan deducted the $700,000 as a business expense under §162. An IRS agent countered that this expense was not ordinary and necessary or that it was personal expense. Therefore, she disallowed the deduction. Evaluate the positions taken by Amos and Susan and by the IRS agent with respect to the Lear jet deduction.
Hint: You will address three issue in this research 1) Ordinary, 2) Necessary, 3) Reasonable. Be sure to address each issue in a separate paragraph.
This question was answered on: Sep 21, 2023
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