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:

Deadweight Loss

Deadweight loss is an economic inefficiency that arises when a market outcome is not optimal, resulting in a loss of total surplus due to factors like taxes or monopolies.

Supply

The total amount of a product or service that is available for purchase at any given time.

Elastic

Describing a situation in economics where the demand or supply for a good or service significantly changes in response to changes in price.

Tax Rates

The percentage at which an individual or corporation is taxed, which can vary based on income level, type of goods or activities.