Question

George Polis owns a popular family restaurant downtown as a sole proprietorship. He spends 7 days a weeks at the restaurant, managing his business. As a result, his wife and kids stop by there to visit on a daily basis and eat most of their meals there. In addition, George often order extra food from his wholesale supplier, prepares casseroles in the restaurant kitchen with the chefs, and takes it home.

Questions:

1. Do you see any ethical issues with George’s practice?
2. What are the tax rules for deducting business expenses?
3. Identify 2 expenses that may be overstated.

Answer 1

As George Polis owns restaurant as sole proprietorship, therefore if he is debiting to drawing all expenses related to meals for his family and also cost of preparation on proportionate basis including salary of chef, then ethically there is no issue. However if George is claiming the cost of meals and preparation cost thereof which has been used for his family then it is ethically wrong.

As per tax rules, George can't claim such cost of meals and preparation cost thereof as expense as it is not business expenses

two expenses overstated- 1. cost of meal 2. cost for preparation like chef time involved to whom salary is paid by firm further other consumable like Gas and depreciation on equipment being used for cooking meals etc