Toby,a Single Taxpayer with No Dependents,is an Employee of a Large

question 97

Multiple Choice

Toby,a single taxpayer with no dependents,is an employee of a large consulting firm.During the year he incurs the following business expenses that are not reimbursed by his employer:

$$\begin{array} { lr } \text { Business entertainment and other meals } &\$ 3,400 \\ \text { Transportation and lodging } &4,200\end{array}$$

Toby's AGI is $100,000 and is in the 28% marginal tax rate.In addition to the expenditures described above,his only other qualified itemized deductions are home mortgage interest of $6,000 and property taxes of $2,000.What is the after-tax cost to Toby of his unreimbursed employee business expenses?

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Definitions:

Default Risk Premium

The extra fee a borrower is required to cover to reward the lender for taking on the default risk.

Pure Interest Rate

The basic rate of interest reflecting the time value of money, excluding the effects of inflation, risk, and other factors.

Base Rate Component

Fundamental part of an interest rate, often the reference rate from which banks determine their own lending rates.

Inflation

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.