Rex,a cash basis calendar year taxpayer,runs a bingo operation which is illegal under state law.During 2015,a bill designated H.R.9 is introduced into the state legislature which,if enacted,would legitimize bingo games.In 2015,Rex had the following expenses: Operating expenses in conducting bingo games $247,000 Payoff money to state and local police 24,000 Newspaper ads supporting H.R.9 3,000 Political contributions to legislators who support H.R.9 8,000 Of these expenditures,Rex may deduct:

Question

Quizplus · Accepted Answer

Rex can deduct the $247,000 in operating expenses for conducting the bingo games, as these are ordinary and necessary business expenses. However, the payoff money, newspaper ads, and political contributions are not deductible as they are either illegal payments or political expenses.

Rex,a Cash Basis Calendar Year Taxpayer,runs a Bingo Operation Which