Which of the Following Business Expense Deductions Is Most Likely

question 47

Multiple Choice

Which of the following business expense deductions is most likely to be unreasonable in amount?

• A) Compensation paid to the taxpayer's spouse in excess of salary payments to other employees.
• B) Amounts paid to a subsidiary corporation for services where the amount is in excess of the cost of comparable services by competing corporations.
• C) Cost of entertaining a former client when there is no possibility of any future benefits from a relation with that client.
• D) All of the choices are likely to be unreasonable in amount.
• E) None of the choices are likely to be unreasonable in amount.

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Definitions:

Returns to Scale

The speed at which production levels rise due to a corresponding rise in all contributing factors.

Labor Hours

The total hours of work put in by workers or employees during a specified period.

Market Costs

Expenses incurred by companies during the production and distribution of goods or services in the marketplace.

Hydraulic Lifts

Mechanical devices that use fluid pressure to raise or lower objects, often used in automotive repairs and construction.