Question

Which of the following business expenses are disallowed or limited for tax purposes? (Check all that apply.)

1). Interest expense paid on loans to purchase tax-exempt securities
2). Political contributions
3). Bribes and kickbacks
4). Entertainment expense
5). Lobbying expenses

Answer 1

The business expenses that are disallowed or limited for tax purposes include interest expense paid on loans to purchase tax-exempt securities, political contributions, bribes and kickbacks, entertainment expenses, and lobbying expenses.

Step-by-step explanation:

For tax purposes, the following business expenses are disallowed or limited:

1. Interest expense paid on loans to purchase tax-exempt securities - Since the securities are tax-exempt, the interest paid on loans taken to purchase them cannot be deducted as an expense.
2. Political contributions - Business expenses incurred for political contributions are generally not tax-deductible.
3. Bribes and kickbacks - These expenses are not tax-deductible as they are illegal.
4. Entertainment expense - Entertainment expenses are generally limited to a 50% deduction for tax purposes.
5. Lobbying expenses - Expenses incurred for lobbying activities are disallowed or limited for tax purposes.