Final answer:
A business expense is considered reasonable if it is not extravagant, aligning with what is appropriate and necessary for business operations. Fair taxation is achieved when everyone pays their fair share, and the perception of fairness is generally improved by minimizing tax loopholes. Hence, the correct answer is option 3.
Step-by-step explanation:
A business expense is deemed to be reasonable in amount if it is not extravagant or excessive, but rather an amount that is deemed acceptable for the nature of the expense. The idea is that the expense should be consistent with what is generally considered to be necessary and appropriate under various circumstances for the operation of the business.
In terms of fairness in taxation, most individuals agree that taxes are only effective when everyone pays their fair share. This underscores the issue with tax loopholes, which often undermine the fairness principle by allowing some to avoid paying their due taxes. Nonetheless, it's acknowledged that many might take advantage of such loopholes if they are personally beneficial. The conclusion is that the tax system would generally be perceived as more fair if there were fewer exceptions, ensuring that all entities bear a proportionate tax burden reflective of their financial activities.