[The following information applies to the questions displayed below.] Indicate t

Question

[The following information applies to the questions displayed below.]

Indicate the amount (if any) that Michael can deduct as an ordinary and necessary business deduction in each of the following situations. (Leave no answers blank. Enter zero if applicable.)

a. From time to time, Michael rents a dump truck for his business. While hauling gravel to a job site, Michael was stopped for speeding. He paid a fine of $125 for speeding and a fine of $80 for carrying an overweight load.

b. Michael paid a part-time employee $750 to drive his rented dump truck. Michael reimbursed the employee $35 for gasoline for the truck.

c. Michael gave a member of the city council a new watch, which cost $200. He hopes that the city councilman will “throw” some contracts to his business.

Explanation / Answer

a. No deduction for fines i.e $0 is the deductible amount , as Michael was fined for speeding and carrying an overweight load.

b. Michael can deduct $785 i.e , ($750 + $35).

c. Deductible amount is $0 . No deduction will be allowed for bribes (against public policy) .

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