Judy Is a Self-Employed Musician Who Performs for a Variety

question 55

Essay

Judy is a self-employed musician who performs for a variety of events. This year, Judy was fined $250 by the city for violating the city's noise ordinance with a relatively loud performance. As a consequence, Judy contributed $1,000 to a campaign committee formed to recall the city's mayor. Judy normally hires three part-time employees to help her schedule events and transport equipment. Judy paid a total of $33,000 to her employees through June of this year. In June, Judy fired her part-time employees and hired her husband to replace them. However, Judy paid him $55,000 rather than $33,000. Judy is on the cash method and calendar year, and she wants to know what amount of these expenditures is deductible as business expenses.

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Definitions:

Expected Rate of Return

The anticipated amount of profit or loss an investment is likely to generate relative to its cost.

Interest-Rate Cost of Funds

The Interest-Rate Cost of Funds is the interest rate that financial institutions pay for the funds they use in their business, influencing the rates they charge on loans.

Optimal R&D

Refers to the most efficient level of spending on research and development activities, where the marginal benefit of R&D equals its marginal cost.

Interest-Rate Cost of Borrowing

The expense incurred by an individual or entity when borrowing money, calculated as a percentage of the total amount loaned.