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Unformatted text preview: Question # 42 A. The effect of the illegal gambling business on Trevors AGI is as follows : Gross income = $52,000 Deductible expenses: Salaries + payout to winners ( $ 8,000 + $29000) = ($37000) Increase in AGI = $15,000 the bribe to police of $7,500 is not deductible since this expense violates public policy. Trevor also must include the tip income of $16,000 in his gross income B. Trevors taxable income also increases by $15,000 C. For an illegal drug activity, all of the expenses are not allowed. Thats why; illegal drug operation would increase Trevors AGI by $52,000. However, the $6,200 cost of goods sold is a reduction in calculating gross income rather than as an expense. Therefore, the illegal drug operation increases Trevors AGI by $45,800 ($52,000 $6,200). QUESTION # 53 First of all I will calculate the rental income ; Rental income = $4,000 less-Taxes and interest (60/365 $5,856) = (963) REMINDER = $3,037 Less: Utilities and maintenance (1/2 $2,600)...
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This note was uploaded on 03/07/2012 for the course BUS 603 taught by Professor Rosnin during the Spring '12 term at Rutgers.
- Spring '12