Terry and Jim Are Both Involved in Operating Illegal Businesses

question 1

Multiple Choice

Terry and Jim are both involved in operating illegal businesses.Terry operates a gambling business and Jim operates a drug running business.Both businesses have gross revenues of $500,000.The businesses incur the following expenses.
Which of the following statements is correct?

• A)Neither Terry nor Jim can deduct any of the above items in calculating the business profit.
• B)Terry should report profit from his business of $250,000.
• C)Jim should report profit from his business of $500,000.
• D)Jim should report profit from his business of $250,000.
• E)None of the above.

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Definitions:

Closing

A meeting attended by a buyer, seller, attorneys, and a representative of a lending institution for the official sale of a property.

Semimonthly

Refers to something happening twice a month or every half month, typically resulting in 24 occurrences in a year.

Paychecks

Regular payments made by employers to employees for the work they have performed, often on a weekly or bi-weekly basis.

Finance Charge

A fee charged for the use of credit or the extension of existing credit, often expressed as an annual percentage rate.