Salaries Are Considered an Ordinary and Necessary Expense of a Trade

question 2

Essay

Salaries are considered an ordinary and necessary expense of a trade or business if they meet what other requirement? What are the tax consequences if this requirement is not met?

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Definitions:

Bliss Point

The optimal quantity of consumption where any further increase or decrease would lead to a less preferable situation for the consumer.

Absolute Value

the non-negative value of a number without regard to its sign, essentially the distance of a number from zero on the number line.

Convex Preferences

A consumer preference pattern indicating that mixtures or combinations of goods are preferred over individual goods, showing a preference for diversification.

Consumption Bundle

A combination of various goods and services that a consumer chooses to purchase.