e. All of these are true. 19. The annual increase in the cash surrender value of a life i nsurance policy: a. Is taxed when the individual dies and the heirs collect he insurance proceeds. b. Must be included in gross income cach year under the original issue discount rules. c. Reduces the deduction for life insurance expense. d. Is not included in gross income each year because of t he substantial restrictions on gaining access to the policy's value. e. None of these 20. Which of the following is a required test for the deductio n of a business expense? a. Ordinary b. Necessary c. Reasonable d. All of these e. None of these 21. Benita incurred a business expense on December 10, 201 9, which she charged on her bank credit card. She paid the credit card statement that included the charge on January 5, 2020 Which of the following is correct? a. If Benita is a cash method taxpayer, she cannot deduct th e expense until 2020. b. If Benita is an accrual method taxpayer, she can deductt he expense in 2019. c. If Benita uses the accrual method, she can choose to ded uct the expense in either 2019 or 2020. d. Only b. and c. are correct. e. Choices a., b., and c. are correct. 22. Rex, a cash basis calendar year taxpayer, runs a bingo op cration that is illegal understate law. During 2019, a bill designated H.R. 9 is introduced into the state legislature, which, if enacted, would legitimize bingo games. In 2019, Rex had the following expenses: Operating expenses in conducting bingo games $247,000 Payoff money to state and local police 24,000 Newspaper ads supporting H.R. 93,000 Political contributions to legislators who support H.R. 98,000 of these expenditures, Rex may deduct: a $247,000. b. S250,000 c. $258,000 d. $282,000. e. None of these. e. None of these. 23. Andrew, who operates a laundry business, incurred the fo llowing expenses during the year. Parking ticket of $250 for one of his delivery vans that p arked illegally, Parking ticket of 875 when he parked illegally while atte nding a rock concert in Tulsa, DUI ticket of $500 while returning from the rock concert Attorney's fee of $600 associated with the DUI ticket. What amount can Andrew deduct for these expenses? b. $250. c. $600. d. $1,425 a. So 24. Which of the following may be deductible in 2019? a. Bribes that relate to a U.S. business. b. Fines paid for violations of the law. c. Interest on a loan used in a hobby. d. All of these. e. None of these 25. Jed is an electrician. He and his wife are accrual basis tax payers and file a joint return. Jed wired a new house for Alison and billed her $15,000. Alison paid Jed S10,000 a nd refused to pay the remainder of the bill, claiming the fee to be exorbitant. Jed took Alison to Small Claims Court for the unpaid amount and was aw arded a $2,000 judgement Jed was able to collect the judgement but not the remaind er of the bill from Alison. What amount of loss may Jed deduct in the current year? a. SO b. S2,000 c. $3.000 d. 85.000 e. None of these. 26. Last year, Lucy purchased a $100,000 account receivabl e for $90,000. During the current year, Lucy collected $97,000 on the account. What are the tax consequences o Lucy associated with the collection of the account receivable? No subsequent collections are expected a. SO b. $2,000 gain c. $3,000 loss d. $13,000 loss e. None of these. Part III Problem noite