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.

---

Definitions:

Bankruptcy Estate

In bankruptcy proceedings, all of the debtor’s interests in property currently held and wherever located, as well as interests in certain property to which the debtor becomes entitled within 180 days after filing for bankruptcy.

Bankruptcy Proceedings

The judicial process through which a debtor is relieved from financial obligations when unable to pay back creditors, legally formalized via court orders.

Debtor's Interests

The financial or asset-based stakes a debtor holds which may be affected by legal actions such as bankruptcy or debt recovery efforts.

Liquidation

The process of winding up a company's financial affairs by selling off assets to pay creditors and distributing any remaining assets to the shareholders.