For the following, indicate if the expenses are Fully deductible, Partially dedu
ID: 2478241 • Letter: F
Question
For the following, indicate if the expenses are Fully deductible, Partially deductible, or Nondeductible for regular tax purposes on Reliant’s 20x1 federal income tax return. Selections F. Fully deductible for regular tax purposes on Reliant’s 20X1 Federal income tax return P. Partially deductible of regular tax purposes on Reliant’s 20X1 Federal income tax return N. Nondeductible for regular tax purposes on Reliant’s 20X1 Federal income tax return 1. Reliant purchased theater tickets for its out of town clients. The performances took place after Reliant’s substantial and bona fide business negotiations with its clients. ( ) 2. Reliant accrued advertising expenses to promote a new product line. Ten percents of the new product line remained in ending inventory. ( ) 3. Reliant incurred interest expense on a loan to purchase municipal bonds. ( ) 4. Reliant paid a penalty for the underpayment of 20x0 estimated taxes. ( ) 5. On December 9, 20x1, Reliant’s board of directors voted to pay a $500 bonus to each nonstick holder employee for 20x1. The bonuses were paid on February 3, 20x2. ( )
Explanation / Answer
1./
RELIANT PURCHASED THEATER TICKETS FOR ITS OUT OF TOWN CLIENTS. THE PERFORMANCES TOOK PLACE AFTER RELIANT’S SUBSTANTIAL AND BONA FIDE BUSINESS NEGOTIATIONS WITH ITS CLIENTS. FULLY DEDUCTABLE. BECAUSE IT IS A GENUINE EXPENSES TO GET THE BUSINESS.
2./
RELIANT ACCRUED ADVERTISING EXPENSES TO PROMOTE A NEW PRODUCT LINE. TEN PERCENTS OF THE NEW PRODUCT LINE REMAINED IN ENDING INVENTORY. PARTIALY DEDUCTIABLE. BECAUSE THE FULL ADVERTISING EXPENDITURE IS NOT A REVENUE EXPENDITURE, IT IS TREASTED AS DEFFRED REVENUE EXPENDITURE.
3./
RELIANT INCURRED INTEREST EXPENSE ON A LOAN TO PURCHASE MUNICIPAL BONDS, NON DEDUCTIABLE , AS THE INCOME FROM MUNICIPAL BOND IS NON TAXABLE ANY EXPENSES RELATED TO THAT INCOME IS ALSO NON DEDUCTIABLE.
4./
RELIANT PAID A PENALTY FOR THE UNDERPAYMENT OF 20X0 ESTIMATED TAXES. NON DEDUCTIABLE, AS NO PENALTY IS TAX DEDUCTIABLE BECAUSE IT IS DUE TO THE CLINTS DEFULT.
5./
ON DECEMBER 9, 20X1, RELIANT’S BOARD OF DIRECTORS VOTED TO PAY A $500 BONUS TO EACH NONSTICK HOLDER EMPLOYEE FOR 20X1. THE BONUSES WERE PAID ON FEBRUARY 3, 20X2 FULLY DEDUCTIBLE. BONUS IS A GENUIN BUSINESS EXPENSES FOR THEIR EMLOYEES.