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Brian owns a successful software company. Brian pays both his sons, Brayden and Camryn, $50,000 per...

Brian owns a successful software company. Brian pays both his sons, Brayden and Camryn, $50,000 per year as employees of the company. Brayden works as a software programmer and $50,000 is the typical wage for his job. Camryn helps out with routine maintenance and janitorial services around the office two weekends per month (typical wage for this job is $5,000 per year). How much of each son's compensation is Brian able to deduct as a business expense?

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Answer #1

Deduction for the compensation to an employee who is also a relative is allowed to the extent it is reasonable.

Being reasonable means the fair compensation for the type of work performed,

Brian paid $50,000 to Brayden for the services performed by him. The reasonable compensation for his services are $50,000 and thus the deduction of $50,000 shall be allowed.

Brian paid $50,000 to Camryn for the services performed by him. The reasonable compensation for his services are $5,000 and thus the deduction for the compensation to Camryn shall be limited to $5000.

For any clarification, please comment. Kindly Up Vote

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