Reference no: EM13376152

Tim runs his an advertising agency. During the year he incurred the following expenses:

• Salary costs of $200,000;
• Salary costs of $10,000 for his daughter who worked with him for one week as part of her university training;
• Travel expenses of $3,000 for travel between home and work;
• Travel expenses of $1,000 for travel from a client's premises to his home;
• $3,000 on a new suit to impress his clients;
• $1,500 on membership of the local sports club where he entertains clients;
• $3,000 in meal expenses on entertaining clients

In May, Tim sent Tom to an advertising exhibition in Indonesia. Tom incurred expenses of $3,000 on the plane ticket and $1,000 on hotel costs. Tim employer did not reimburse him for those expenses but provided Tom with a daily allowance of $200 for his meal and transportation costs. Tom had chosen to go to the exhibition because her family is in Indonesia and he took the opportunity to visit them while she was there. The conference ran for three days and she stayed on for an additional five days at her parents' home.

Required

Advise Tim and Tom of their tax consequences arising from the above information.