TAX_T1_Sol10.pdf - 47 Award 10.00 points Ronald is a cash...

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47. Award: 10.00 points Ronald is a cash method taxpayer who made the following expenditures this year. Which expenditure is completely deductible in this period as a business expense? $4,000 for rent on his office that covers the next 24 months. $3,000 for a new watch for the mayor to keep "good relations" with city hall. $2,500 for professional hockey tickets distributed to a customer to generate "goodwill" for his business. $55 to collect an account receivable from a customer who has failed to pay for services rendered. None of the choices are completely deductible. The rent is prepaid and must be amortized, the watch is a bribe, the gift is too expensive for deduction, and although a cash method taxpayer cannot deduct bad debts, amounts paid to collect those receivables are fully deductible as an ordinary and necessary business expense.
References Multiple Choice Difficulty: 2 Medium Learning Objective: 01-02 Determine the limits on deducting business expenses.

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