Jones Operates an Upscale Restaurant and He Pays Experienced Cooks

question 58

Multiple Choice

Jones operates an upscale restaurant and he pays experienced cooks $35,000 per year. This year he hired his son as an apprentice cook. Jones agreed to pay his son $40,000 per year. Which of the following is a true statement about this transaction?

• A) Jones will be allowed to deduct $40,000 only if his son eventually develops into an expert cook.
• B) Jones will be allowed to accrue $40,000 only if he pays his son in cash.
• C) Jones will be allowed to deduct $35,000 as compensation and another $5,000 can be deducted as an employee gift.
• D) Jones can only deduct $20,000 because an apprentice cook is only worth half as much as an experienced cook.
• E) None of these.

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