Kitty Runs a Brothel (Illegal Under State Law) and Has

question 73

Essay

Kitty runs a brothel (illegal under state law) and has the following items of income and expense.What is the amount that she must include in taxable income from her operation? $$\begin{array} { l l r } \text { Income } & & \$ 200,000 \\\text { Expenses: } & & \\& \text { Rent } & 8,000 \\& \text { Utilities } & 2,000 \\& \text { Bribes to police } & 10,000 \\& \text { Office supplies } & 5,000 \\& \text { Legal fees } & 20,000 \\& \text { Depreciation } & 14,000 \\& \text { Illegal kickbacks } & 15,000\end{array}$$

---

Definitions:

Performance Problems

Issues or challenges that hinder an individual's or a group's ability to achieve expected results or standards.

Rules of Thumb

Simple, heuristic principles or guidelines that provide practical advice for making quick, approximate decisions or solving problems.

Uncertainty

The condition of being unsure about something or lacking complete information or knowledge about outcomes, often leading to hesitation or caution in decision-making.

Representativeness Heuristic

A cognitive shortcut in which individuals judge the probability of an event based on how closely it resembles a typical case, often leading to biases in decision-making.