3. [LO 1] Q3 Whether a business expense is reasonable in amount is often a difficult question. Explain why determining reasonableness is difficult and describe a circumstance where reasonableness is likely to be questioned by the IRS.

4. [LO 2] Q5 What kinds of deductions are prohibited as a matter of public policy? Why might Congress deem it important to disallow deductions for expenditures against public policy?

5. [LO 2] Q6 Provide an example of an expense associated with the production of taxexempt income, and explain what might happen if Congress repealed the prohibition against deducting expenses incurred to produce tax-exempt income.

6. [LO 2] Q7 {Research} Peggy is a rodeo clown, and this year she expended $1,000 on special funny clothes and outfits. Peggy would like to deduct the cost of these clothes as work-related because she refuses to wear the clothes unless she is working. Under what circumstances can Peggy deduct the cost of her clown clothes?

7. [LO 1, LO 2] Q11 What expenses are deductible when a taxpayer combines both business and personal activities on a trip? How do the rules for international travel differ from the rules for domestic travel?

8. [LO 2] Q13 Describe the record-keeping requirements for business deductions expenses including mixed-motive expenditures.

9. [LO 2] Q14 Describe the computation of the limit placed on the business interest deduction. Is the disallowed interest ever deductible? 10. [LO 3] Q16 How do casualty loss deductions differ when a business asset is completely destroyed as opposed to the destruction of a personal-use asset?