XYZ Corporation pays $600,000 in salary to its president, Jimmy, during Year 1. XYZ also...
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Accounting
XYZ Corporation pays $600,000 in salary to its president, Jimmy, during Year 1. XYZ also pays $300,000 in salary to Fred, Jimmys 16-year-old son, for maintenance services. The fair value of the maintenance services Fred provides is $18,000, and the fair value of the services Jimmy provides is $900,000. Which statement about XYZs deductions for salary paid is correct?
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XYZ can deduct $18,000 of the salary paid to Fred.
XYZ can deduct the $300,000 paid to Fred, since that is the salary actually paid.
XYZ cannot deduct any of the salary paid to Fred.
XYZ must deduct $600,000 salary in Year 1 and $300,000 in Year 2.
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