Angel owns a gourmet Mexican restaurant. His head chef, Carmen, is arrested for a parole violation. Because Angel needs Carmen back to work as soon as possible, Angel pays her bail of $250, attorney's fees of $300, and a court fine of $200.
I.A business purpose exists for the payments.
II.If Carmen were required to repay the expenditures, it would constitute a loan and not be deductible for Angel.
III.If Angel does not require Carmen to repay the amounts paid on Carmen's behalf, the payments constitute compensation and Angel gets a deduction for the expenses paid.

Question

Angel owns a gourmet Mexican restaurant. His head chef, Carmen, is arrested for a parole violation. Because Angel needs Carmen back to work as soon as possible, Angel pays her bail of $250, attorney's fees of $300, and a court fine of $200.
I.A business purpose exists for the payments.
II.If Carmen were required to repay the expenditures, it would constitute a loan and not be deductible for Angel.
III.If Angel does not require Carmen to repay the amounts paid on Carmen's behalf, the payments constitute compensation and Angel gets a deduction for the expenses paid.
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Quizplus · Accepted Answer

Angel has a business purpose for the payments as they are necessary to get his head chef back to work. If Carmen repays the expenditures, it would be considered a loan and not deductible. If Angel does not require repayment, the payments are considered compensation, which is deductible.

Angel Owns a Gourmet Mexican Restaurant