Which of the following trade or business expenditures of Ajax Inc. are deductibl

Question

Which of the following trade or business expenditures of Ajax Inc. are deductible on its current year tax return? If an expenditure is not deductible, explain why it is not a valid deduction.
Expenditure
Amount Salaries and wages to employees...................................................... $400,000
Purchase of new office building %u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026%u2026...250,000
Payment of illegal parking %uFB01nes of President ...................................................... 1,400
Payment of wedding expenses for President%u2019s daughter's wedding %u2026%u2026%u2026%u2026. 16, 000
Entertainment expenses related to company business....................................... 25,000
Interest on money borrowed to buy tax-exempt securities%u2026%u2026%u2026%u2026%u2026%u2026..%u2026%u2026.. 9,000
Total expenditures ........................................................................................... $700,400

Explanation / Answer

1) Salary and wages to employees are deductible because they are business expense.

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2) Purchase of new office building is not deductible it because is a capital expenditure and they are not deductible.

===================================================================================================================================================== 3) Payment of illegal parking fines are not deductible because illegal it is an illegal activity

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4) President's daughter's wedding is not deductible as this is a personal expense

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5) Entertainment expenses related to company business is 50% deductible because you can deduct meals and entertainment at 50%

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6) Interest on money borrowed to buy tax-exempt securities are not deductible because expense related to tax-exempt income is not deductible

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