Baron pays $4,000 in legal fees. Under what conditions can Baron deduct the legal fees?
To be deductible, an expense must have a Business Purpose that exceeds any tax avoidance motive. This is interpreted to mean that the expense be related to either a trade or business of the taxpayer or a production of income (investment) activity. Therefore, if the legal fees relate to Baron's trade or business or to an investment, he will be able to deduct the fees. If they relate to a personal activity, then they are not deductible.
You might also like to view...
Mini-Case Question. The percentage cost of goods sold by Sparks Inc. is 40%. The percentage cost of goods sold by its three largest competitors is 30%, 30%, and 20%. What is the cost advantage index of Sparks Inc.?
A) 80 B) 120 C) 43 D) 150 E) 62
Auditors are more concerned with the occurrence assertion for revenues than the completeness assertion because:
A. it is difficult to determine when services have been performed. B. entities are more likely to understate than overstate revenues. C. entities are more likely to overstate than understate revenues. D. the allowance for doubtful accounts often is understated.
Which of the following theories of ethical thought is illustrated by the phrase "Do unto others as you would have them do unto you"?
A) utilitarianism B) consequentialism C) deontology D) humanist theory
Decision variables are often used in formulas that show results.
Answer the following statement true (T) or false (F)