QUESTION 4

1. Which of the following business expense deductions is most likely to be unreasonable in amount?

   		Compensation paid to the taxpayer's spouse in excess of salary payments to other employees.
   		Amounts paid to a subsidiary corporation for services where the amount is in excess of the cost of comparable services by competing corporations.
   		Cost of a meal with a former client when there is no possibility of any future benefits from a relation with that client.
   		All of the choices are likely to be unreasonable in amount.
   		None of the choices are likely to be unreasonable in amount.

2. Which of the following is a true statement about the limitation on business interest deductions?

   		Interest disallowed by this limitation is carried back three years and then forward five years.
   		The limitation is calculated as a percentage of the taxpayers total taxable income.
   		This limitation is not imposed on businesses with average annual gross receipts of $25 million or less for the prior three taxable years.
   		All of the choices are false.
   		All of the choices are true