(a) Henry operates an illegal drug-running business and has the following items of income and expense. What is Henry’s net income for tax purposes from this operation? Income $800,000 Expenses: Cost of goods sold 300,000 Rent 24,000 Utilities 9,000 Bribes to police 55,000 Insurance expense 5,000 Legal fees 25,000 Depreciation 30,000 Illegal kickbacks 30,000 (b) What is Henry’s net income for tax purposes from this operation if it is a legal business?

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Solution Income 800000 Minus COGS 300000 Rent 24000 Uti... View the full answer