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Item 1 of 6 (20 points) Each of the following four parts is an independent set of facts and circumstances. a) In general, business expenditures

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Item 1 of 6 (20 points) Each of the following four parts is an independent set of facts and circumstances. a) In general, business expenditures that are directly connected to a business activity must meet three overall conditions to be deductible for income tax purposes. Briefly state and define each of the three conditions. Explain why determining whether an expenditure meets each of the three conditions is not always an exact science, b) In certain cases, Congress has specifically prohibited or limited the ability of a business to deduct expenditures that otherwise appear to meet the general business expense deductibility requirements. Identify and briefly explain three different examples of such prohibitions or limitations. For each example, provide the most likely reason why Congress was motivated to make such a rule. c) During 2020, Sunrise Corporation provided $100,000 of services on account to a client, Sunset Corporation. Because of financial difficulties Sunset experienced related to operating in a Covid-19 environment, Sunset did not pay the amount it owes to Sunrise. After Sunrise determined that it will not be able to collect any money from Sunset, Sunrise "writes-off" the account. If Sunrise uses the cash method, show your calculation of the amount (if any) that Sunrise can deduct this year as a bad debt expense for tax purposes - explain your reasqning. Next, assume Sunrise uses the accrual method. calculation of the amount (if any) that Sunrise can deduct this year as a bad debt expense for tax purposes -- explain your reasoning. Show your d) Rapids Corporation purchased a building last year (2019) for $10 million that it uses in its business. In order to make the purchase, Rapids needed to borrow $6 million and is paying the related interest expense. When preparing a draft of its corporate income tax return for the current 2020 year, Rapids reports taxable income of $50,000. This amount includes the recognition of $10,000 of interest income from investments, $200,000 of depreciation expense, and a tentative amount of $300,000 for interest expense. Show your calculation of the maximum business interest deduction that Rapids can recognize on its 2020 federal income tax return. Remember to take the CARES Act legislation into account. How is this treatment different from the regular tax rules in this area

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