____ 30. Rex, a cash basis calendar year taxpayer, runs a bingo operation which
ID: 2587791 • Letter: #
Question
____ 30. Rex, a cash basis calendar year taxpayer, runs a bingo operation which is illegal under state law. During 2016, a bill designated H.R. 9 is introduced into the state legislature which, if enacted, would legitimize bingo games. In 2016, Rex had the following expenses:
Operating expenses in conducting bingo games
$127,000
Payoff money to state and local police
34,000
Newspaper ads supporting H.R. 9
13,000
Political contributions to legislators who support H.R. 9
18,000
Of these expenditures, Rex may deduct: Please select the correct answer and why (include a brief description).
a.
$127,000.
b.
$214,000.
c.
$227,000.
d.
$282,000.
e.
None of the above.
Operating expenses in conducting bingo games
$127,000
Payoff money to state and local police
34,000
Newspaper ads supporting H.R. 9
13,000
Political contributions to legislators who support H.R. 9
18,000
Explanation / Answer
Answer is A
127000
Rex is only allowed to ddeduct operating expenses related to game and in the act rest of the expense like Payoff money to state and local police, Newspaper ads supporting H.R. 9, Political contributions to legislators who support H.R. 9 are not allowable
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