Question

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

Option 1: Contributions to the governor's reelection campaign
Option 2: Traffic fines incurred by an over-the-road truck driver
Option 3: Legal fees incurred to defend the business in a lawsuit
Option 4: Interest expense paid on loans to purchase tax-exempt securities
Option 5: Depreciation expense on a building used to store company vehicles
Option 6: Advertising cost for ads placed in the local newspaper

Answer 1

Deductible business expenses for tax purposes generally include legal fees to defend the business, depreciation expense on assets used in the business, and advertising costs. Contributions to political campaigns, traffic fines, and interest on loans for tax-exempt securities are not deductible.

Step-by-step explanation:

When it comes to deductible business expenses for tax purposes, the IRS has specific guidelines on what can be deducted. Here are the appropriate expenses from the options given:

• Option 3: Legal fees incurred to defend the business in a lawsuit are generally deductible as these are ordinary and necessary expenses for running a business.
  
• Option 5: Depreciation expense on a building used to store company vehicles is deductible as it's an expense that captures the reduction in value of a business asset over time.
  
• Option 6: Advertising costs for ads placed in the local newspaper are deductible because they are considered necessary for promoting the business and generating income.

Options 1, 2, and 4 are generally not deductible. Contributions to political campaigns, traffic fines, and interest on loans used to purchase tax-exempt securities are explicitly excluded from tax deductions.