Matt Is a Sales Representative for a Local Company

question 97

Multiple Choice

Matt is a sales representative for a local company.He entertains customers as part of his job.During the current year he spends $3,000 on business entertainment.The company provides him an expense allowance of $2,000 under a nonaccountable plan.How will Matt treat the $2,000 partial reimbursement and the $3,000 entertainment expense?

• A)He will deduct the $1,000 net expense as a miscellaneous itemized deduction,subject to the 2% of AGI floor.
• B)He will deduct $500 of the net expense as a miscellaneous itemized deduction,subject to the 2% of AGI floor.
• C)He will recognize $2,000 of income and deduct $3,000 as a miscellaneous itemized deduction,subject to the 2% of AGI floor.
• D)He will recognize $2,000 of income and deduct $1,500 as a miscellaneous itemized deduction,subject to the 2% of AGI floor.

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Definitions:

Market Effect

The impact of supply, demand, and external factors on the prices and availability of goods and services in a market.

Minimum-Wage Laws

A legal framework that specifies the minimum hourly earnings employers are obliged to pay their staff.

Lowest Wage

The minimum amount of compensation an employer is legally allowed to pay to workers, also known as minimum wage.

Free Market

An economic system where prices for goods and services are determined by the open market and by consumers, with minimal government intervention.