Question

vella owns and operates an illegal gambling establishment. in connection with this activity, he has the following expenses during the year: rent $24,000 bribes 40,000 travel expenses 4,000 utilities 18,000 wages 230,000 payroll taxes 13,800 property insurance 1,600 illegal kickbacks 22,000 what are vella's total deductible expenses for tax purposes? $fill in the blank 1

Answer 1

Vella's total deductible expenses for tax purposes are generally not applicable as operating an illegal gambling establishment is against the law.

Step-by-step explanation:

To determine Vella's total deductible expenses for tax purposes, we need to identify the expenses that can be claimed as deductions. However, it is important to note that operating an illegal gambling establishment is against the law and any associated expenses are generally not deductible for tax purposes. In the United States, the Internal Revenue Service (IRS) does not allow deductions for expenses related to illegal activities.

Answer 2

Expenses from illegal activities, including bribes and kickbacks, are not deductible for tax purposes, meaning Vella's total deductible expenses would be $0 for his illegal gambling establishment.

Step-by-step explanation:

The question relates to which expenses are deductible for tax purposes within the context of an illegal operation. As a general rule, expenses related to illegal activities are not deductible for tax purposes under the U.S. Internal Revenue Code. Therefore, expenses like rent, bribes, travel expenses, utilities, wages, payroll taxes, property insurance, and illegal kickbacks wouldn’t typically be considered deductible. The only exception might be the cost of goods sold, which can sometimes be deducted even if the business is illegal. But specific expenses like rent, bribes, and kickbacks are definitely not deductible.