Which of the Following Business Expense Deductions Is Most Likely

question 9

Multiple Choice

Which of the following business expense deductions is most likely to be unreasonable in amount?

• A)Compensation paid to the taxpayer's spouse in excess of salary payments to other employees.
• B)Amounts paid to a subsidiary corporation for services where the amount is in excess of the cost of comparable services by competing corporations.
• C)Cost of a meal with a former client when there is no possibility of any future benefits from a relation with that client.
• D)All of the choices are likely to be unreasonable in amount.
• E)None of the choices are likely to be unreasonable in amount.

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Definitions:

Borrowing Money

The act of obtaining funds from lenders under the agreement to repay with interest within a specified timeframe.

Increases Equity

An action or event that raises the value of an owner's shares in a company or property.

Decreases Risk

Involves actions or strategies aimed at reducing the potential for loss or harm in various contexts, such as financial investments, business operations, or personal decisions.

Reduces Liquidity

Refers to any action or situation that decreases the ease with which assets can be converted into cash without significant loss in value.