30. Rex, a cash basis calendar year taxpayer, runs a bingo operation which is illegal under state law. During 2016, a bill designated H.R. 9 is introduced into the state legislature which, if enacted, would legitimize bingo games. In 2016, Rex had the following expenses: Operating expenses in conducting bingo games $227,000 Payoff money to state and local police 34,000 Newspaper ads supporting H.R. 9 13,000 Political contributions to legislators who support H.R. 9 18,000 Of these expenditures, Rex may deduct: a. $197,000. b. $214,000. c. $227,000. d. $282,000. e. None of the above. ____ 31. Terry and Jim are both involved in operating illegal businesses. Terry operates a gambling business and Jim operates a drug running business. Both businesses have gross revenues of $500,000. The businesses incur the following expenses. Terry Jim Employee salaries $200,000 $200,000 Bribes to police 25,000 25,000 Rent and utilities 50,000 50,000 Cost of goods sold 0 125,000 Which of the following statements is correct? a. Neither Terry nor Jim can deduct any of the above items in calculating the business profit. b. Terry should report profit from his business of $250,000. c. Jim should report profit from his business of $500,000. d. Jim should report profit from his business of $250,000. e. None of the above. ____ 32. Black Corporation incurred the following expenses in connection with the development of a new product: Salaries $110,000 Utilities 16,000 Materials 15,000 Advertising 5,000 Market survey 3,000 Depreciation on machine 10,000 Black expects to begin selling the product in November 1 of this year. If Black elects to amortize research and experimental expenditures over 60 months, determine the amount of the deduction for research and experimental expenditures for the current year. a. $0. b. $151,000. c. $5,034. d. $152,000. e. None of the above. ____ 33. Ebony, Inc., has taxable income of $700,000 and qualified production activities income (QPAI) of $700,000 in 2016. Ebonys domestic production activities deduction is: a. $36,000. b. $42,000. c. $54,000. d. $63,000. e. None of the above. ____ 34. Hu, who is single, has the following items for 2016: Salary $25,000 Interest income 3,000 Itemized deductions ($27,000 attributable to casualty loss) (32,000) What is Hus NOL for 2016? a. $0. b. $1,000. c. $2,000. d. $25,000. e. None of the above. ____ 35. Jayne Company acquires a new machine (ten-year property) on January 15, 2013, at a cost of $180,000. Jayne also acquires another new machine (seven-year property) on November 5, 2012, at a cost of $30,000. No election is made to use the straight-line method. The company does not make the 179 election. Jayne takes additional first-year depreciation. Determine the total deductions in calculating taxable income related to the machines for 2013. a. $116,143. b. $11,143. c. $22,287. d. $132,858. e. None of the above. ____ 36. Liz, who is single, travels frequently on business. Art, Lizs 84-year-old dependent grandfather, lived with Liz until this year when he moved to Granite Falls Nursing Home because he needs daily medical and nursing care. During the year, Liz made the following payments to Granite Falls on behalf of Art: Room at Granite Falls $36,300 Meals for Art 7,260 Doctor and nurse fees 5,610 Cable TV service for Arts room 660 Total $49,830 Granite Falls has medical staff in residence. Disregarding the 7.5% floor, how much, if any, of these expenses qualifies as a medical expense deduction by Liz? a. $5,610. b. $41,910. c. $49,170. d. $49,830. e. None of the above. ____ 37. During 2016, Pugh, a self-employed individual, paid the following amounts: Real estate tax on Georgia residence $3,900 State income tax 1,500 Real estate taxes on land in Florida (held as an investment) 1,200 Gift tax paid on gift to daughter 1,300 State sales taxes 1,750 State occupational license fee 400 Property tax on value of his car (used 80% for business) 185 What is the maximum amount Pugh can claim as taxes in itemizing deductions from AGI? a. $6,600. b. $6,650. c. $6,850. d. $8,625. e. None of the above. ____ 38. Jayne, who lives in Georgia, volunteered to travel to Alabama in June to work on a home-building project for Good Deeds (a qualified charitable organization). She was in Alabama for three weeks. She normally makes $700 per week as a carpenters assistant and plans to deduct $2,100 as a charitable contribution. In addition, she incurred the following costs in connection with the trip: $900 for transportation, $1,100 for lodging, and $300 for meals. What is Jaynes deduction associated with this charitable activity? a. $600. b. $4,400. c. $2,300. d. $2,200. e. $3,700.