Why Does the Federal Tax Law Disallow a Business Deduction

question 58

Multiple Choice

Why does the federal tax law disallow a business deduction for a fine or penalty paid to any government?

• A)A deduction for the payment of a fine or penalty would be a subsidy for bad behavior.
• B)The payment of a fine or penalty is not an ordinary business expense.
• C)The payment of a fine or penalty is not an expense for financial reporting purposes.
• D)A deduction for the payment of a fine or penalty would distort the measurement of taxable income.

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Definitions:

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