Question

Tom operates an illegal drug-running operation and incurred the following expenses: Salaries $ 75,000 Illegal kickbacks 20,000 Bribes to border guards 25,000 Cost of goods sold 160,000 Rent 8,000 Interest 10,000 Insurance on furniture and fixtures 6,000 Utilities and telephone 20,000 Which of the above amounts reduces his taxable income?A) $0.B) $160,000.C) $279,000.D) $324,000.E) None of the above.

Answer 1

Answer:

B) $160,000

Explanation:

The computation of the amount that reduced the taxable income is shown below:

Here Cost of goods sold of $160,000 would be treated as a negative item in determining gross income instead allowed as a deduction.  

And, For a drug dealer, all other deductions would be disallowed

So the option B is correct