Reference no: EM13992053
Discuss whether the following expenditures meet the ordinary, necessary, and reasonable requirements:
a. The Brisbane Corporation is being sued in connection with allegations that it produced a faulty product. Brisbane has hired an expert witness to testify that the product was not faulty. The expert's standard fee is $200 per day plus expenses. Brisbane has agreed to pay her standard fee plus expenses and a bonus of $5,000 if the company wins the lawsuit.
b. Shannon is a professor who teaches film study at Burwood College. Her annual sal- ary is $45,000. She maintains an extensive library of films and books at her home. During the year, she spends $15,000 on new material for her library. Most of the material is available at the university library.
c. Francis operates a video store and rents the building from his aunt Shirley, who acquired it last year. He paid the previous owner $600 a month in rent. When Francis's lease expires, his aunt increases the rent to $750. Rent for a comparable building in the area is $850.
d. Max owns a dairy farm in Wisconsin. During the year, he makes 10 phone calls to his sister Ruby, who is an accountant. The calls, which total $150, are for financial and business advice. Ruby prepares Max's business and personal tax returns.
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Business of new environmental regulations
: Ruth, a small business owner, incurs $3,000 in travel, lodging, and meal expenses to testify in Washington, D.C., on the effect on small business of new environmental regulations.
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Employee of the dinsmore corporation
: Russell is an employee of the Dinsmore Corporation, a small plumbing repair business. He learns that his boss Simon, the sole owner of the business, was arrested 20 years ago for burglary. Because Simon needs access to homes and businesses to do h..
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Proper treatment of expenditures
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Proper tax treatment of the investigation expenses
: She has spent $15,000 investigating potential locations for the restaurant and $14,000 on an analysis of the demand for a restaurant specializing in Asian cuisine. Write a letter to Rebecca explaining the proper tax treatment of the investigation ..
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Financial and business advice
: Max owns a dairy farm in Wisconsin. During the year, he makes 10 phone calls to his sister Ruby, who is an accountant. The calls, which total $150, are for financial and business advice. Ruby prepares Max's business and personal tax returns.
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How do agricultural activities affect soil and water quality
: A growing population increases the global demand for food. The environment provides us with food resources through agriculture. However, agriculture activities also affect the environment by degrading water and soil resources. This degradation als..
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Successful medical practice
: a. Sadie owns 5 shares of Megaconglomerate stock. She spent $4,000 to attend the annual shareholders' meeting. b. Sam runs a successful medical practice. Because he has a substantial investment portfolio, he spent $3,000 to attend a seminar on inve..
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Letter to carla explaining whether big star
: During the current year, the grandson appeared in 100 commercials. Big Star wants to deduct the full $25,000 as a business expense. The grandson will report the $25,000 as income. Write a letter to Carla explaining whether Big Star can deduct the a..
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Operating costs of the car for tax purposes
: How should RayeAnn treat the operating costs of the car for tax purposes? In 2013, RayeAnn sells the car for $6,500. Her business use for 2011 through 2013 remains at 70%, and she properly deducted $5,880 in depreciation. What is her taxable gain ..
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