Matt Is a Sales Representative for a Local Company

Multiple Choice

Matt is a sales representative for a local company.He entertains customers as part of his job.During the current year he spends $3,000 on business entertainment.The company provides him an expense allowance of $2,000 under a nonaccountable plan.How will Matt treat the $2,000 partial reimbursement and the $3,000 entertainment expense?

A) He will deduct the $1,000 net expense as a miscellaneous itemized deduction,subject to the 2% of AGI floor.
B) He will deduct $500 of the net expense as a miscellaneous itemized deduction,subject to the 2% of AGI floor.
C) He will recognize $2,000 of income and deduct $3,000 as a miscellaneous itemized deduction,subject to the 2% of AGI floor.
D) He will recognize $2,000 of income and deduct $1,500 as a miscellaneous itemized deduction,subject to the 2% of AGI floor.