Portia, a CPA, Operates a Financial and Tax Planning Service

question 6

Multiple Choice

Portia, a CPA, operates a financial and tax planning service. During the months of February, March, and April of every year, she hires graduate tax students from The University of Chicago as interns. This year she hires 4 interns. One is her brother, Sidney. She pays all interns except Sidney $20 per hour for help with tax return preparation and tax research. Sidney receives $25 an hour. She cannot deduct the full amount of Sidney's hourly wages because the expense is not

• A)appropriate.
• B)ordinary.
• C)necessary.
• D)reasonable.

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Definitions:

Substitution Effect

The change in consumption patterns due to a change in the prices of goods, leading consumers to replace more expensive items with less costly alternatives.

Income Effect

A change in the consumption patterns of individuals arising from a change in their real income, due to shifts in prices or income levels.

Unskilled Workers

Workers who have no specific training or specialized skills and usually perform simple tasks that require limited education.

Minimum Wage

The minimum wage permitted by law that employers can pay their employees, whether it's calculated by the hour, day, or month.