Question
Audrey holds an ownership interest in a business entity. She is in the 28% tax bracket. The entity incurs $30,000 of meals and lodging expense
Audrey holds an ownership interest in a business entity. She is in the 28% tax bracket. The entity incurs $30,000 of meals and lodging expense for Audrey, which she believes qualify for exclusion treatment as a qualified fringe benefit. Which of the following statements are correct?
a. If the entity is a partnership and Audrey has a 60% interest, the effect of the $30,000 expenditure by the partnership on Audrey’s tax liability is an increase of $5,040
b. The entity is a sole proprietorship, the effect of the $30,000 expenditure by the sole proprietorship on Audrey’s tax liability is $8,400
c. If the entity is a C corporation, the effect of the $30,000 expenditure by the corporation on Audrey’s tax liability is $0
d. Only b & c are correct
e. a, b, & c are correct.Step by Step Solution
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D Only b c are correct Because as per Sec 119 the exclusion is ...Get Instant Access to Expert-Tailored Solutions
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Fundamentals of corporate finance
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
2nd Edition
978-0470933268, 470933267, 470876441, 978-0470876442
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