5) Judy is a self-employed musician who performs for a variety of events. This y

Question

5) Judy is a self-employed musician who performs for a variety of events. This year Judy was fined $250 by the city for violating the city's noise ordinance with a relatively loud performance. As a consequence, Judy contributed $1,000 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 $33,000 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 $55,000 rather than $33,000. Judy is on the cash method and calendar year, and she wants to know what amount of these expenditures is deductible as busines expenses

Explanation / Answer

Total deductible expense: 66000 *Calculation Paid to part time employees 33000 Add: Paid to husband (hired in replace of employees) 33000 Total Deduction 66000 *Additional wages of 22000 (55000 - 33000) is not deductible, because it is excessive.

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