Which of the following tests is not used to determine whether an employees pay is deductible as an expense?

1. Depending upon the taxpayers method of accounting, payments are made or expenses are incurred for services rendered during the year.
2. Payments are made for services actually performed.
3. Paymentsforservicesanemployeerenderedareordinaryandnecessaryandare directly or indirectly connected with your trade or business.
4. Paymentsforservicesanemployeerenderedarereasonable.Thistestisbasedon the circumstances at the time you contract for the services, not on those existing when the amount of pay is questioned.

Answer A is incorrect!