Bryon Operates a Consulting Business and He Usually Works Alone

question 83

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 $17,500, but Bryon paid Fred $29,000 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:

Incurred

Refers to costs, expenses, or liabilities that have been realized or obtained by a business, usually through its operations.

Fringe Benefits

Benefits provided to employees in addition to wages and salaries.

Recognized

In accounting, refers to the formal acknowledgment of a financial transaction or position within financial statements.

Social Security Taxes

Taxes collected from employees and employers to fund the Social Security program, providing benefits for retirees, disabled individuals, and survivors.