Question

Which of the following statements regarding the amendment of Section 162 to disallow certain categories of payments is true?

a) The amendment broadens the scope of allowable payments
b) Section 162 remains unchanged
c) The amendment narrows the categories of allowable payments
d) Section 162 now allows all categories of payments

Answer 1

The amendment of Section 162 narrows the categories of allowable payments.

Step-by-step explanation:

The correct statement regarding the amendment of Section 162 to disallow certain categories of payments is c) The amendment narrows the categories of allowable payments.

Section 162 of the Internal Revenue Code allows for the deduction of ordinary and necessary business expenses. However, certain categories of payments are disallowed based on specific regulations and guidelines. If an amendment is made to Section 162 to disallow certain categories of payments, it means that the scope of allowable payments becomes narrower, limiting the deductions that can be claimed by individuals and businesses.

For example, if the amendment disallows entertainment expenses as deductible payments, businesses would no longer be able to claim deductions for client entertainments such as meals and events.