Question

 

Dana, who around the city is generally referred to simply as "The Dane," runs an illegal gambling joint.   Here are her income and expenses.   Calculate her net taxable income from the gambling joint.

Gross Income/Sales                                                    $300,000

Expenses

            Rent                                                                 $30,000

            Maintenance and Cleaning                            $6,000

            Bribes to police and inspectors                       $20,000                                  

            Supplies                                                           $4,000

            Food and drink costs                                       $15,000

            Accounting and Legal                                     $10,000

            Fines and penalties paid                                 $8,000

            Depreciation                                                   $10,000

Answer 1

		Amount in $
Gross Income/Sales		300,000
Less : Allowable Expenses:
Rent	30,000
Maintenance and Cleaning	6,000
Supplies	4,000
Food and Drinks Cost	15,000
Accounting and Legal	10,000
Depreciation	10,000	75,000
Net Taxable Income		225,000
Bribes to Police and Inspectors	20,000
Fines and Penalties paid	8,000
Disallowed Expenses		28,000
Internal Revenue Code Section 280E disallows a deductions or Credit for any expenses in any business which is illegal.