Instructions : Please provide 2-3 sentence brief explanation and decide wheter t
ID: 2564273 • Letter: I
Question
Instructions : Please provide 2-3 sentence brief explanation and decide wheter the statement is True or False. All sources must be noted. SHOW ALL WORK.
____ A. All employment related expenses are classified as deductions for AGI.
____ B. Harry, a shareholder-employee of Fox, Inc., receives a $350,000 salary. The IRS classifies $100,000 of this amount as unreasonable compensation. The effect of this reclassification is to increase Fox’s gross income by $100,000. Harry’s income remains the same
____ C. A basketball team that pays a player an annual salary of $10 million can deduct the entire $10 million as salary expense. If the same amount is paid to the CEO of Microsoft, only $5 million is deductible.
____ D. Jill sells land to her adult son, Jim, for its $50,000 appraised value. Her adjusted basis for the land is $60,000. Jill’s recognized loss is $0 and James adjusted basis for the land is $60,000.
____ E. If a business debt previously deducted as partially worthless becomes totally worthless this year, only the amount not previously deducted can be deducted this year.
Explanation / Answer
ANSWER
(A) All employment related expenses are classified as deductions for AGI.
- The given statement is FALSE.
Only some employment related expenses are classified as deductions for AGI.
Unreimbursed employee expenses are classified as deductions from AGI while reimbursed employee expenses are classified as deductions for AGI.