For Each of the Following Situations Explain Why the Expenditure

question 61

Essay

For each of the following situations explain why the expenditure is or is not deductible and any limitations that may be placed on the amount of the deduction.
a. Akira is self-employed as a personal financial planner. He went out-of-town for two days to visit three of his best clients and incurs the following expenses:


$\begin{array}{lr}\text { Airfare } & \$ 350 \\\text { Rental car } & 160 \\\text { Lodging } & 240 \\\text { Incidentals } & 90 \\\text { Meals } & 220 \\\text { Entertainment } & 130\end{array}$


b. Woodrow is President and CEO of ISPEP, a dosely held corporation with assets of $\$ 20,000,000$ . Woodrow, who owns $60 \%$ of the company, decides to hire his twin daughters who have just completed their freshman year at Aztec State to work in the promotions department of the company. His daughters will be paid $\$ 5,000$ each for the summer. Other college students who are hired for the summer to perform similar tasks will be paid $\$ 4,000$ .


c. Felix is a Realtor. To show his appreciation, he gives each dient who buys a home from him a $\$ 75$ wall dock. During the year Felix gives 64 clocks to his clients.


d. Sandy sues Harrison for divorce. Originally, Sandy asks for one-half of all their assets, including $50 \%$ of Harrison's car dealership. Harrison's lawyer has worked out a compromise with Sandy and her attorney that allows Harri son to retain $100 \%$ ownership of the dealership. Harrison pays his lawyer $\$ 10,000$ in legal fees.
a.Marvin owns a real estate development firm and his adjusted gross income is $60,000.He enrolls as a part-time student at Northern College.His primary motivation for taking the classes is to obtain a greater understanding of the accounting issues associated with his real estate development business.He also believes that he can save 25% of the amount he pays in accounting expenses.The cost of the 2 courses he enrolls in is $900.

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Definitions:

Initial Compliance

The initial willingness to go along with a request or follow a rule or guideline, often before any form of resistance or refusal is considered.

Personal Responsibility

The concept of acknowledging and accepting the choices one makes and the consequences that follow.

Authority Figure

An individual who holds power or influence in a societal structure, often seen as a source of guidance or enforcement of rules and standards.

Social Facilitation

The improvement in performance observed when an individual performs in the presence of others as opposed to when they are alone.