C if trevors business was an illegal drug operation

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c. If Trevor’s business was an illegal drug operation and the cost of the illegal drugs sold was $6,200, how would your answers to parts (a) and (b) differ?
45: Vermillion, Inc., a publicly held corporation (not a TARP recipient), pays the following salaries to its executives: Salary Bonus Retirement Plan Contribution CEO $2,000,000 $100,000 $80,000 Executive vice president $1,800,000 $90,000 $72,000 Treasurer $1,600,000 0 $64,000 Marketing vice president $1,500,000 $75,000 $60,000 Operations vice president $1,400,000 $70,000 $56,000 Distribution vice president $1,200,000 $60,000 $48,000 Research vice president $1,100,000 0 $44,000 Controller $800,000 0 $32,000 Vermillion normally does not pay bonuses, but after reviewing the results of operations for the year, the board of directors decided to pay a 5% bonus to selected executives. What is the amount of these payments that Vermillion may deduct? 47: Terry traveled to a neighboring stat to investigate the purchase of two hardware stores. His expenses included travel, legal, accounting, and miscellaneous expenses. The total was $52,000. He incurred the expenses in June and July 2013. Under the following circumstances, what can Terry deduct in 2013? a. Terry was in the hardware store business and did not acquire the two hardware stores. b. Terry was in the hardware store business and acquired the two hardware stores and began operating them on October 1, 2013. c. Terry did not acquire the two hardware stores and was not in the hardware store business. d. Terry acquired the two hardware stores but was not in the hardware store business when he acquired them. Operations began on October 1, 2013. 49: Samantha, an executive, has AGI of $100,000 before considering income or loss from her miniature horse business. Her outside income comes from prizes for winning horse shows, stud fees, and sales of yearlings. Samantha’s home is on 20 acres, half of which she uses for the horse activity (i.e., stables, paddocks, fences, tack houses, and other related improvements). Samantha’s office in her home is 10% of the square footage of the house. She uses the office exclusively for maintaining files and records on the horse activities. Her books show the following income expenses for the current year: Income from fees, prizes and sales $22,000 Expenses Entry fees 1,000 Feed and veterinary bills 4,000 Supplies 900 Publications and dues 500 Travel to horse shows (no meals) 2,300
Salaries and wages of employees 8,000 Depreciation - Horse equipment $3,000 Horse farm improvements 7,000 On 10% of personal residence 1,000 11,000 Total home mortgage interest 24,000 Total property taxes on home 2,200 Total property taxes on horse farm improvements 800 The mortgage interest is only on her home because the horse farm improvements are not mortgaged. a. What are Samantha’s tax consequences if the miniature horse activity is a hobby? b. If it is a business? 51: During the year (not a leap year), Anna rented her vacation home for 30 days, used it personally for 20 days, and left it vacant for 315 days. She had the following income and expenses.

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