Rex incurred $ 8,000 of employment-related meal and entertainment expenses during the year. Rex’s employer is trying to determine whether to reimburse Rex directly for the expenses (and claim the $ 4,000 deduction on its corporate tax return) or to pay him additional salary (in which case Rex would claim the unreimbursed expenses as a miscellaneous itemized deduction on his personal 1040 form). Rex has $ 5,000 of other miscellaneous itemized deductions and $ 100,000 of adjusted gross income before any additional salary. Assuming that both Rex and his employer have a 35 percent marginal tax rate, which option is best for the company and for Rex?
Answer to relevant QuestionsGive an example of tax planning between a shareholder/ employee and a related corporation. Why must the tax professional be cognizant of how tax law administration works? What are the major functions of the national office of the IRS? What are the chief responsibilities of the following? a. The IRS Commissioner b. The IRS Chief Counsel c. The National Taxpayer Advocate d. Local taxpayer advocates Should prevailing interest rates bear on tax decision making in either or both of the following situations? a. The taxpayer is contemplating litigation in either the Tax Court or the Court of Federal Claims. b. An ...
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