Which of the following business expense deductions is most likely to be unreasonable in amount?
A)Compensation paid to the taxpayer's spouse in excess of salary payments to other employees.
B)Amounts paid to a subsidiary corporation for services where the amount is in excess of the cost of comparable services by competing corporations.
C)Cost of a meal with a former client when there is no possibility of any future benefits from a relation with that client.
D)All of the choices are likely to be unreasonable in amount.
E)None of the choices are likely to be unreasonable in amount.

Question

Quizplus · Accepted Answer

Each of the described expenses could be considered unreasonable: A) paying a spouse more than other employees could be seen as excessive unless justified by their role; B) paying a subsidiary more than market rates could be seen as not cost-effective; C) spending on a meal with no expected future benefit does not seem to serve a business purpose.

Which of the Following Business Expense Deductions Is Most Likely