Terry and Jim Are Both Involved in Operating Illegal Businesses

question 85

Multiple Choice

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. 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.

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Definitions:

Management Decisions

The process by which management selects among available options to guide the operations and set the strategic direction of an organization.

Full Capacity

The maximum level of output that a company can sustain to generate products or services under normal operating conditions.

Special Price

A temporary discounted offer or a negotiated price lower than the usual list price, often used to stimulate demand or reward customers.

Variable Costs

Costs that vary directly with the level of production or the volume of services provided.