S is a cash basis, calendar year taxpayer. She operates Cloth R Us. All of the s

Question

S is a cash basis, calendar year taxpayer. She operates Cloth R Us. All of the store's profits come from the sale of fabric. Sales are $2 million. During the year she paid the following expenses:

            1.         $3,000 premium for liability insurance covering her business. The coverage runs from December 1, 2015 through November 30, 2018.

            2.         $10,000 for cloth, all of which is still on hand at the end of the taxable year.

            3.         $2,000 for "points" related to obtaining a loan for the purchase of her personal residence.

            4.         $1,200 for "points" related to obtaining a loan on rental property.

Explanation / Answer

Only business expenditure allowable. Hence, only 1st transaction allowable. Therefore, option a is correct.

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