Bryon Operates a Consulting Business and He Usually Works Alone

question 107

Essay

Bryon operates a consulting business and he usually works alone. However, during the summer Bryon will sometimes hire undergraduate students to collect data for his projects. This past summer Bryon hired Fred, the son of a prominent businessman, for a part-time summer job. The summer job usually pays about $17,000, but Bryon paid Fred $27,000 to gain favor with Fred's father. What amount of Fred's summer wages can Bryon deduct for tax purposes? Bryon is on the cash method and calendar year.

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Definitions:

Option Contract

A financial derivative that gives the buyer the right, but not the obligation, to buy or sell an asset at a specified price on or before a specified date.

Exercise Price

The cost at which an options contract's owner has the right to purchase or sell the underlying asset.

Time Value

The concept that money available now is worth more than the identical sum in the future due to its potential earning capacity.

January Call

In finance, might refer to a call option that expires in January, allowing investors to purchase stock at a specified price within a given time frame.