61.  David R. and Ella M. Cole (ages 39 and 38, respectively) are husband and wife who live at 1820 Elk Avenue, Denver, CO 80202. David is a regional sales manager for Wren Industries, a national wholesaler of plumbing and heating supplies, and Ella is a part-time dental hygienist for a chain of dental clinics.

 

•     David is classified by Wren as a statutory employee with compensation for 2014 (based on commissions) of $95,000. He  is  expected  to  maintain  his  own  office and pay for all business expenses from this amount. Wren does not require him         to render any accounting as to the use of these funds. It does not withhold Fed-       eral and state income taxes but does withhold and account for the payroll taxes incurred (e.g., Social Security and Medicare). The Coles are adequately covered       by Wren’s noncontributory medical plan but have chosen not to participate in its

 

§ 401(k) retirement plan.

 

David’s employment-related expenses for 2014 are summarized below:

 

 

 

Airfare	$8,800
Lodging	5,000
Meals (during travel status)	4,800
Entertainment	3,600
Ground transportation (e.g., limos, rental cars, and  taxis)	800
Business gifts	900
Office supplies (includes postage, overnight delivery, and copying)	1,500

 

The entertainment involved business meals for purchasing agents, store owners, and building contractors. The business gifts consisted of $50 gift certificates to a national restaurant. These were sent by David during the Christmas holidays to 18 of his major customers.

 

In addition, David drove his 2012 Ford Expedition 11,000 miles for business and 3,000 for personal use during 2014. He purchased the Expedition on August 15, 2011, and has always used the automatic (standard) mileage method for tax purposes. Parking and tolls relating to business use total $340 in 2014.

 

•     When the Coles purchased their present residence in April 2011, they devoted 450 of the 3,000 square feet of living space to an office for David. The property

 

 

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