Karl F. and Jeanne S. Wheat are married and live at 13071 Forestview Drive, Columbia, MO 65201. Karl is a self-employed insurance claims adjuster (business

Karl F. and Jeanne S. Wheat are married and live at 13071 Forestview Drive, Columbia, MO 65201. Karl is a self-employed insurance claims adjuster (business
activity code 524290), and Jeanne is a dietitian for the local school district. 1. Karl represents several national casualty insurance companies on a contract
basis. He is paid a retainer and receives additional compensation if the claims for the year exceed a specified number. As an independent contractor, he is
responsible for whatever expenses he incurs. Karl works out of an office near his home. The office is located at 1202 Brentwood Avenue. He shares Suite 326 with a
financial consultant, and operating expenses are divided equally between them. The suite has a common waiting room with a receptionist furnished and paid by the
landlord. Karl’s one-half share of the 2011 expenses he paid is listed below. Office rent $11,600 Utilities (includes telephone and fax) 4,300 Replacement of
waiting room furniture on April 22 3,600 Renters’ insurance (covers personal liability, casualty, and theft) 1,400 Office expense (supplies and postage meter) 740
New Toshiba copier (less trade-in on old machine) on February 7 300 Waiting room coffee service (catered) 280 Waiting room magazine subscriptions 90 For his own
business use, Karl purchased a laptop computer for $2,100 on June 17 and a Nikon camera for $1,200 on February 5. Except for his vehicle (see item 2), Karl uses
the A?ยง 179 write-offoption whenever possible. 2. On January 2, 2011, Karl paid $31,000 (including sales tax) to purchase a gently used Dodge Durango SUV that he
uses 92% of the time for business. No trade-in was involved, and he did not claim any A?ยง 179 expensing. Karl uses the actual operating cost method to compute his
tax deduction, using the 200% declining-balance MACRS depreciation method with a half-year convention. His expenses relating to the Durango for 2011 are as
follows: Gasoline $3,100 Auto insurance 1,500 Interest on car loan 820 Auto club dues 225 Oil changes and lubrication 140 License and registration 90 In connection
with his business use of the Durango, Karl paid $510 for parking and $350 in fines for traffic violations. In 2011, Karl drove the Durango 14,352 miles for
business [8,612 miles between January 1 and June 30 and 5,740 miles between July 1 and December 31] and 1,248 miles for personal use (which includes his daily
round-trip commute to work). 3. Karl handles most claim applications locally, but on occasion, he must travel out of town. Expenses in connection with these
business trips during 2011 were $930 for lodging and $1,140 for meals. He also paid $610 for business dinners with several visiting executives of insurance
companies with whom he does business. Karl’s other business-related expenses for 2011 are listed below. Contribution to H.R. 10 (Keogh) retirement plan $8,000
Premiums on medical insurance covering family (spouse and children) 4,600 Premiums on disability insurance policy(pays for loss of income in the event Karl is
disabled and cannot work 2,400 State and local occupation fee 450 Birthday gift for receptionist($25 box of Godiva chocolates plus $3 for gift wrap) $28 4. Jeanne
earns $32,000 as a registered dietician for the Columbia School District. The job she holds, manager of the school lunch program, is not classified as full time.
Consequently, she is not eligible to participate in the teacher retirement or health insurance programs. Jeanne’s expenses for 2011 are summarized as follows:
Contribution to traditional IRA $4,000 Job hunting expense 720 Continuing education program 350 Membership dues to the National Association of Dietitians 120

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