Matt Is a Sales Representative for a Local Company

question 97

Multiple Choice

Matt is a sales representative for a local company.He entertains customers as part of his job.During the current year he spends $3,000 on business entertainment.The company provides him an expense allowance of $2,000 under a nonaccountable plan.How will Matt treat the $2,000 partial reimbursement and the $3,000 entertainment expense?

• A)He will deduct the $1,000 net expense as a miscellaneous itemized deduction,subject to the 2% of AGI floor.
• B)He will deduct $500 of the net expense as a miscellaneous itemized deduction,subject to the 2% of AGI floor.
• C)He will recognize $2,000 of income and deduct $3,000 as a miscellaneous itemized deduction,subject to the 2% of AGI floor.
• D)He will recognize $2,000 of income and deduct $1,500 as a miscellaneous itemized deduction,subject to the 2% of AGI floor.

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Definitions:

Charles II

The king of England, Scotland, and Ireland who reigned during the Restoration period (1660-1685) after the English Civil War, known for his policies of religious tolerance.

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A 17th-century colonial province of the Dutch Republic that encompassed parts of what is now the northeastern United States.

Navigation Acts

A series of English and later British laws that regulated trade between England and its colonies to control colonial commerce and ensure it benefitted England.

Colonial Trade

Trade between colonial powers and their colonies, often involving the exchange of raw materials for finished goods, and playing a central role in the economic systems of empires.