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:

Cumulative Preferred Stock

A type of preferred stock where missed dividend payments accumulate and must be paid out before any dividends can be issued to common stockholders.

Dividend

A portion of a company's earnings that is distributed to shareholders as a reward for their investment.

Par Value

Par Value is the face value of a bond or share of stock as stated by the issuing company, and it's often a nominal amount used for accounting purposes.

Dividends Payable

This is a liability on the balance sheet representing the amount of dividends that a corporation has declared but not yet paid to its shareholders.