Question

Bryon operates a consulting business and he usually works alone. However, during the summer Bryon will sometimes hire undergraduate students to collect data for his projects. This past summer Bryon hired Fred, the son of a prominent businessman, for a part-time summer job. The summer job usually pays about $17,000, but Bryon paid Fred $27,000 to gain favor with Fred's father. What amount of Fred's summer wages can Bryon deduct for tax purposes?

Answer 1

Answer:

Compensation paid to employee in excess of salary payments comes unreasonable in the amount (that is the bribe) so the excess of amount should not be deductible as business expenses as per tax laws.

Usually Bryon pay for the part-time summer job is $17,000 is deductible and the remaining amount of $10000 ($27,000-$17,000) paid to gain favor from the Fred's father is not deductible.