Three friends go to a restaurant. David, a self-employed entrepreneur, says, “I’ll pay and deduct it as a business expense.” Denise, a salesperson, takes the check and says, “I’ll put this on my company’s credit card. It won’t cost us anything.” Derek, a factory manager, says, “I’ll use my company’s credit card and call it overhead on a cost-plus contract with a client.” (A cost-plus contract means the company receives its costs plus a percent of those costs.) “That way, my company pays for dinner and makes a profit.” Who should pay?

Three friends go to a restaurant. David, a self-employed entrepreneur, says, “I’ll pay and deduct it as a business expense.” Denise, a salesperson, takes the check and says, “I’ll put this on my company’s credit card. It won’t cost us anything.” Derek, a factory manager, says, “I’ll use my company’s credit card and call it overhead on a cost-plus contract with a client.” (A cost-plus contract means the company receives its costs plus a percent of those costs.) “That way, my company pays for dinner and makes a profit.” Who should pay?

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter5: Gross Income: Exclusions

Section: Chapter Questions

Problem 4DQ

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