29 Jun Question David R. Betty N. Lee [ages 45(1964) and 46(1963)] are married and live atXXXXX Casper, WY 82609. David is consulting engineer, while Betty is a paralegal. They file a joint return a
Question
David R. Betty N. Lee [ages 45(1964) and 46(1963)] are married and live atXXXXX Casper, WY 82609. David is consulting engineer, while Betty is a paralegal. They file a joint return and use the cash basis for tax purposes.
1. Trained as a mining engineer, David has developed considerable expertise in the treatment and disposition of waste material. He also is well versed in the various Federal
and state requirements for land reclamation projects. David maintains a consulting practice through which he renders advice on these matters. Most of his clients are small
and medium size owners and operators located in Wyoming and contiguous states( e.g Montana, Idaho, Utah). Characteristically, David is retained by a client on a contract fee basis and is reimbursed for all out-of-pocket expenses. In performing his service, David usually visits the job location and later submits his recommendations in written report along with statement for his services and expenses.
David was paid the following amounts relating to the consulting practice in 2009:
Fees for services rendered
$92,800
Expenses reimbursement
Airfare $8,200
Lodging $5,200
Meals $6,100
Transportation(taxi,limo,rentals airports) $920
$20,420
Total received
$113,220
2. Not included in the business transaction listed under item 1 above are the following:
Payments from Ibis Mining received in January 2009
for work performed in December 2008 $4,400
Payment from Anhinga Mining received in January 2010
for work performed in December 2009 $5,100
Nonpayment by Cormorant Mining for work
performed in March 2009 $3,700
David did not incur travel expenses in any of these engagements ( i, e the work was done in his office). As Cormorant Mining is in bankruptcy, David does not expect to collect any of this fee.
3. Other expenses paid by David in 2009 relating to his practice are summarized below:
Advertising in trade journals $2,400
Office supplies(including drafting materials) $1,200
Contribution to H.R. 10(KEOGH) plan $9,000
State occupation license $300
Subscriptions to trade journals $240
Membership dues to trade associations $180
Landscape models(amount paid to a
topographer for several land reclamation projects) $3,200
Business phone and internet service $860
Premiums on medical insurance (covering self,
spouse, and dependants) $3,800
4. To save on rent and as a matter of convenience, David maintains an office in the home. Twenty percent of the 3,000-square-foot living area is devoted to the office. David inherited the home on Cody Way from his father, who died on June 6, 2002, when it had fair market value of $400,000 of which $40,000 was allocated to the land. It is current fair market value is $500,000( $50,000 allocated to the land). County land records reflect that David’s father bought the land in 1968 for $6,000 and built the house in 1972 at cost of $60,000. Relevant information regarding the property for 2009 is summarized below:
Casualty insurance $2,300
Repairs and maintenance $2,900
Utilities $4,800
The property taxes and mortgage interest on the property are listed in item 15 belo
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