Question

Partiers Unlimited sent one of its employees to attend an association meeting on behalf of the company. It is customary, and good for business, for spouses to attend these meetings and participate in the social activities in the evenings. The employee took her spouse along for this purpose. Airfare for the employee was $200, food was $100, and lodging was $150. Partiers reimbursed its employee for these amounts but included $450 on the employee's W-2 compensation at the end of the year. How much and in what manner should Partiers deduct for these expense?

A. $450 as travel expense.
B. $900 as travel expense.
C. $450 as travel expense and $450 as compensation
D. $650 as travel expense and $250 as compensation.

Answer 1

Partiers Unlimited should deduct $450 as a business travel expense and report the other $450 as compensation for the employee's spouse's attendance, totaling $900 on the books.

Step-by-step explanation:

The question is about how Partiers Unlimited should deduct expenses related to an employee attending an association meeting with a spouse. The company reimbursed the employee for airfare, food, and lodging, totaling $450, and also included this amount as compensation on the employee's W-2. The correct deduction for Partiers would be Option C: $450 as travel expense and $450 as compensation. This is because the employee's expenses are legitimate business expenses, while the spouse's expenses would be considered additional compensation to the employee. Therefore, the company should deduct $450 as a travel expense and the other $450 that was reimbursed for the spouse's expenses should be reported as compensation to the employee.