ACCOUNTING Kitty runs a brothel (illegal under state law) and has the following

Question

ACCOUNTING

Kitty runs a brothel (illegal under state law) and has the following items of income and expense. What is the amount that she must include in taxable income from her operation?

Income

$200,000

Expenses:

Rent

8,000

Utilities

2,000

Bribes to police

10,000

Medical expense

5,000

Legal fees

20,000

Depreciation

14,000

Illegal kickbacks

15,000

Income

$200,000

Expenses:

Rent

8,000

Utilities

2,000

Bribes to police

10,000

Medical expense

5,000

Legal fees

20,000

Depreciation

14,000

Illegal kickbacks

15,000

Explanation / Answer

She should include utilitues , bribes to police , illegal kickbacks , all this will not be exempted from income tax

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