Audry Has an Ownership Interest in a Business Entity

question 7

Multiple Choice

Audry has an ownership interest in a business entity. She is in the 28% tax bracket. The entity incurs $30,000 of meals and lodging expense for Audry, which she believes qualify for exclusion treatment under § 119. Which of the following statements are correct?

• A) If the entity is a partnership and Audry has a 60% interest, the effect of the $30,000 expenditure by the partnership on Audry's tax liability is an increase of $5,040.
• B) If the entity is a sole proprietorship, the effect of the $30,000 expenditure by the sole proprietorship on Audry's tax liability is $8,400.
• C) If the entity is a C corporation, the effect of the $30,000 expenditure by the corporation on Audry's tax liability is $0.
• D) Only b. and c. are correct.
• E) a., b., and c. are correct.