Pamela Was an Officer in Green Restaurant Which Subsequently Went

question 134

Multiple Choice

Pamela was an officer in Green Restaurant which subsequently went bankrupt.Pamela started a new restaurant and,to establish goodwill,paid off the debts of $100,000 of Green Restaurant.She was under no obligation to do so.The $100,000 is

• A)deductible currently as an itemized deduction.
• B)capitalized because the expenses are not ordinary.
• C)deductible currently as a trade or business expense since the expenses are considered ordinary and necessary business expenses.
• D)None of the above.

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Definitions:

Pension Discount Rate

The interest rate used to determine the present value of future pension liabilities.

Current Cash Flows

The money that is moving in and out of a business in the present time, especially as it pertains to operating activities.

Past Service Costs

Costs related to pension plan benefits earned by employees in prior periods, which are recognized in the current period due to plan amendments or changes.

Actuarial Gains and Losses

Gains or losses that arise from the adjustment of assumptions or the application of actuarial models differently over time in evaluating a company's pension liabilities.