Audrey holds an ownership interest in a business entity. She is in the 28% tax bracket. The
Question:
Audrey holds an ownership interest in a business entity. She is in the 28% tax bracket. The entity incurs $30,000 of meals and lodging expense for Audrey, which she believes qualify for exclusion treatment as a qualified fringe benefit. Which of the following statements are correct?
a) If the entity is a partnership and Audrey has a 60% interest, the effect of the $30,000 expenditure by the partnership on Audrey’s tax liability is an increase of $5,040
b) the entity is a sole proprietorship, the effect of the $30,000 expenditure by the sole proprietorship on Audrey’s tax liability is $8,400
c) If the entity is a C corporation, the effect of the $30,000 expenditure by the corporation on Audrey’s tax liability is $0
d) only b & c are correct
e) a, b, & c are correct.
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates