Question: John Gemstone, a wealthy client, has recently been audited by the IRS. The agent has questioned the following deduction items on Mr. Gemstones tax return

John Gemstone, a wealthy client, has recently been audited by the IRS. The agent hasquestioned the following deduction items on Mr. Gemstone’s tax return for the year under review:
• A $10,000 loss deduction on the rental of his beach cottage.
• A $20,000 charitable contribution deduction for the donation of a painting to a localart museum. The agent has questioned whether the painting is overvalued.
• A $15,000 loss deduction from the operation of a cattle breeding ranch. The agent isconcerned that the ranch is not a legitimate business (i.e., is a hobby).
Your supervisor has requested that you represent Mr. Gemstone in his discussions withthe IRS.
What additional questions should you ask Mr. Gemstone in an attempt to substantiatethe deductibility of the above items?

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