1. Logan owns a horse ranch. Logan dislikes horses, but he opened the ranch because he heard it was a lucrative business. Logans horse ranch has lost money every year for the past 5 years (including this year), but Logan has made some changes to business operations, including hiring a consultant and increasing his prices. Logan anticipates that as a result of these changes, his horse ranch will generate a profit in the next year or two. This year, Logan hired his brother, Luke, to work at the horse ranch. Logan pays Luke $500/hr to clean the horse stalls. Logan also hired his best friend, Lucy, to do Logans grocery shopping and other personal errands. He pays Lucy $15/hr. Which of the following is most accurate?

a)Logan cannot deduct any of the costs associated with the horse ranch because the horse ranch would be classified as a hobby, not a business b)Logan can deduct the full salary paid to Luke because Luke works in Logans horse ranch business

c)Logan can deduct the full salary paid to Lucy because the amount of the expense is reasonable

d)Logan can deduct the full salary paid to Lucy because grocery shopping is ordinary and necessary None of the above are correct

2. In 2019, Perry, who is not otherwise involved in the gas station business, spends $53,000 investigating the acquisition of a gas station. All costs are ordinary and necessary. Perry decides not to acquire the gas station. What amount can Perry deduct in 2019 for the expenses incurred in investigating the acquisition of the gas station if Perry makes an election to accelerate his deductions as much as possible?