Using the Tests for Deductibility Discussed in Chapter 5, Explain

question 135

Essay

Using the tests for deductibility discussed in Chapter 5, explain why the following expenses are not deductible. Mel is a sprint car racer. He does repair and maintenance on his cars in the garage at his
a. home. After repairing the cars, he tests them on city streets. He received 15 citations totaling $2,900) for speeding, running stop signs, and reckless driving.
b. Albert, a carpenter, pays his 10-year-old son $150 a week to empty waste cans in his work shop. Albert's son works each evening and two hours on Saturday morning.
c. Sharon contributes $25 to a local organization that is campaigning against a foreign trade bill. The legislation would damage Sharon's business.
d. Marline borrows $5,000 and pays $500 in interest. The loan is used to purchase bonds issued by the City of Lafayette School District.
Christine is the wife of a physician, and she is an experienced horseman. She has raised
e. horses for ten years and occasionally shows them for prize money. She also boards horses for monthly fees. She enjoys her horse activity but has never made a profit in any year.
Her horses are appraised at $200,000.

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Definitions:

Direct Mail

A marketing method involving sending promotional materials directly to potential customers at their home or office addresses.

Catalogs

Printed or digital publications listing items for sale, often with descriptions and images, used by companies to showcase their products to customers.

Retailing

The selling of goods or services directly to consumers through various channels, including physical stores, online platforms, and direct sales.

Store Locations

The physical places where retail businesses operate and to which consumers must travel to purchase goods.