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.

Question

Quizplus · Accepted Answer

The payment of $25 per hour to Portia's brother Sidney may not be considered reasonable because it exceeds the amount paid to the other interns for the same work. The expense must be reasonable in relation to other comparable payments for the same services in order to be deductible.

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