If a Taxpayer Operated an Illegal Business (Not Drug Trafficking)

question 12

Essay

If a taxpayer operated an illegal business (not drug trafficking), what expenses can be deducted and what expenses are disallowed?

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Definitions:

Work in Process

Partially completed goods that are still in the production process at the end of an accounting period.

Manufacturer's Inventory

Includes raw materials, work in process, and finished goods held by a manufacturer, representing various stages of production.

Raw Materials Inventory

The total cost of all the components that will be used in the production of goods but have not yet been used.

Days' Sales

A financial metric measuring the number of days it takes for a company to convert its inventory into sales.