Question

Star Corp., an accrual-method C corporation, incurred the following expenses in 2020 (all of which are ordinary and neccessary 
unless the facts indicate otherwise): Office rent: $50,000 CEO compensation: $1,500,000 Salary paid to janitor: $250,000 Business meals: $60,000 (100% of the amount paid) Client entertainment: $100,000 (100% of the amount paid) Traffic fines: $5,000 Advertising: $70,000 Taxes & licenses (state, local & payroll): $30,000 Life insurance policy on CEO - premiums: $12,000 Average office rents in the area run $50,000-$55,000/year for similar office space. Star Corp.'s janitor is the CEO's sister. Reasonable salary for a janitor with similar experience, job description and work hours is $20,000/year. The CEO often runs late to important meetings, and he has a tendency to speed (and get speeding tickets) on his way. Star Corp. pays the speeding tickets. Star Corp. is the beneficiary on the life insurance policy. What is Star Corp.'s total deductible business expenses for the year?

This is under 2019 tax law

Answer 1

Office Rent (deductible as business expense) $50,000

CEO compensation $1,500,000

Business Meals (50% deductible) $30,000

Client entertainment (Not deductible) $0

Traffic Fines (No deduction on fines , these are private speeding tickets) $0

Advertising expenses (Deductible) $70,000

Taxes and Licenses (Deductible) $30,000

Life insurance policy (CEO) $0

Salary paid to Janitor (Reasonable amount deductible as per industry standards) $20,000

Total Business expense deductible = $1,700,000