Question

Judy is a self-employed musician who performs for a variety of events. This year Judy was fined $315 by the city for violating the city's noise ordinance with a relatively loud performance. As a consequence, Judy contributed $870 to a campaign committee formed to recall the city's mayor. Judy normally hires three part-time employees to help her schedule events and transport equipment. Judy paid a total of $34,300 to her employees through June of this year. In June Judy fired her part-time employees and hired her husband to replace them. However, Judy paid him $53,700 rather than $34,300. Judy is on the cash method and calendar year, and she wants to know what amount of these expenditures is deductible as business expenses.

Answer 1

Solution:-

What amount of these expenditures is deductible as business expenses:-

Deductible business expenses

$68,600

Explanation:-

The fine of $315 and political contribution of $870, are not deductible as against public policy. The compensation of $34,300 for the part-time employees is deductible. Wages paid to her husband of $34,300 would also be deductible. However, the additional wages of $19,400 would appear to be excessive and therefore not deductible.