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____ 30. Rex, a cash basis calendar year taxpayer, runs a bingo operation which

ID: 2587791 • Letter: #

Question

____   30.   Rex, a cash basis calendar year taxpayer, runs a bingo operation which is illegal under state law. During 2016, a bill designated H.R. 9 is introduced into the state legislature which, if enacted, would legitimize bingo games. In 2016, Rex had the following expenses:

Operating expenses in conducting bingo games

$127,000

Payoff money to state and local police

34,000

Newspaper ads supporting H.R. 9

13,000

Political contributions to legislators who support H.R. 9

18,000

Of these expenditures, Rex may deduct: Please select the correct answer and why (include a brief description).

a.

$127,000.

b.

$214,000.

c.

$227,000.

d.

$282,000.

e.

None of the above.

Operating expenses in conducting bingo games

$127,000

Payoff money to state and local police

34,000

Newspaper ads supporting H.R. 9

13,000

Political contributions to legislators who support H.R. 9

18,000

Explanation / Answer

Answer is A

127000

Rex is only allowed to ddeduct operating expenses related to game and in the act rest of the expense like Payoff money to state and local police, Newspaper ads supporting H.R. 9, Political contributions to legislators who support H.R. 9 are not allowable