Fran Holloway Is an Active Dealer in Used Automobiles

question 77

Essay

Fran Holloway is an active dealer in used automobiles. While preparing her income tax return, you notice that she purchased one automobile for $7,000 and sold it one month later for $5,800 to Brian Holloway Enterprises. Explain, in terms of the income tax concepts, why the $1,200 loss on the sale of the automobile may not be deductible.

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Definitions:

Federal Receipts

Revenues collected by the federal government, primarily through taxes, but also including other sources such as customs duties and earnings from the Federal Reserve's operations.

Recession

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, typically visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

Outlays

Expenses or expenditures made by a government, organization, or individual.

Stabilization Policies

Government strategies aimed at reducing fluctuations in the economy through monetary and fiscal policy measures to achieve low inflation, reduced unemployment, and sustainable growth.