Which of the Following Statements About the Tax Consequences of Gambling

question 23

Multiple Choice

Which of the following statements about the tax consequences of gambling is true?

• A) Gambling winnings are not taxable, and gambling losses are not deductible.
• B) Gambling losses are an above-the-line deduction.
• C) Gambling losses are deductible as itemized deductions only to the extent of gambling winnings.
• D) Gambling winnings are taxable, but gambling losses are not deductible.

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Definitions:

Periodic Inventory

An inventory system in which the inventory count is conducted at specific periods, determining the cost of goods sold by beginning inventory plus purchases minus ending inventory.

Merchandise Inventory

Goods a company intends to sell to customers that are stored as inventory.

Purchases

Represents the total amount of goods bought by a business for resale or for use in production.

Rental Income

This is income received from renting out property or equipment. It is often considered passive income and must be reported for tax purposes.