Which of the following is a true statement?
A)Interest expense is not deductible if the loan is used to purchase municipal bonds.
B)Insurance premiums are not deductible if paid for "key-employee" life insurance.
C)One-half of the cost of business meals is not deductible.
D)All of these choices are true.
E)None of the choices are true.

Question

Quizplus · Accepted Answer

A) Interest expense is not deductible if the loan is used to purchase municipal bonds. This is because interest income from municipal bonds is tax-exempt, so it would be unfair to allow taxpayers to deduct interest expense paid on a loan used to purchase them.
B) Insurance premiums are not deductible if paid for "key-employee" life insurance. This is because "key-employee" life insurance policies are taken out by a business on the life of an employee or key executive, and the business is the beneficiary, not the employee or executive's family. These policies are considered part of the business, rather than personal expenses, and so the premiums are not deductible.
C) One-half of the cost of business meals is not deductible. This is because the government considers meals and entertainment expenses to be a potential area for abuse, where taxpayers could claim personal expenses as business expenses to reduce their taxes. As a result, only 50% of these expenses are deductible.

Which of the Following Is a True Statement