Tim operates an illegal drug-running operation and incurred the following expens
ID: 2514317 • Letter: T
Question
Tim operates an illegal drug-running operation and incurred the following expenses:
Salaries
$ 85,000
Illegal kickbacks
2,000
Bribes to border guards
5,000
Cost of goods sold
297,000
Rent
9,000
Interest
10,000
Insurance on furniture and fixtures
6,000
Utilities and telephone
10,000
Which of the above amounts reduces his taxable income?
a.
$0.
b.
$160,000.
c.
$297,000.
d.
$307,000.
e.
None of the above.
Salaries
$ 85,000
Illegal kickbacks
2,000
Bribes to border guards
5,000
Cost of goods sold
297,000
Rent
9,000
Interest
10,000
Insurance on furniture and fixtures
6,000
Utilities and telephone
10,000
Explanation / Answer
C. $297,000
Cost of goods sold i.e. $297,000 will reduce the taxable income