Question

Printers Company pays a $25,000 annual membership fee to a trade association for paper wholesalers. The trade association estimates that 60% of its dues are allocated to lobbying activities. If amount is zero, enter, "0". a. Printers Company's total deductible expense for tax purposes is $ . b. Assume the same facts as above except that the $25,000 was incurred for in-house lobbying expenses. Printers Company's total deductible expense for tax purposes is $ .

Answer 1

Answer: a. $10,000. b. $0

Explanation:

Lobbying expenses are the money that are used to influence a legislative body either at the federal, state or local level. I'm general, the lobbying expenses are not typically deductible. The amount that was paid to the trade association which was not part of the lobbying will be as deduction.

a. We are told that the trade association estimates that 60% of its dues are allocated to lobbying activities. This means that (100% - 60%) = 40% wasn't part of the lobbying expenses. We will now find 40% of $25,000. This will be:

= 40% of $25,000

= 40/100 × $25000

= 0.4 × $25000

= $10,000

Therefore, the total deductible expense for tax purposes is $10,000

b. We are told that the $25,000 was incurred for in-house lobbying expenses. Therefore Printers Company's total deductible expense for tax purposes will be $0.