1. ack, a geologist, opened a business organized as a C corporation called Geo-Jack (GJ) in January of this year. Jack is the sole shareholder. Assume GJ reports on a calendar year and uses the accrual method of accounting. For each item below, indicate its effect on Jacks taxable income and you must clearly indicate whether it is positive or negative. (0.5 points each, 4 points total)

   1. In January, GJ rented a small business office about 12 miles from Jacks home. GJ paid $14,000, which represented a damage deposit of $6,000 plus rent for two years ($4,000 annually).

      ______________

   2. GJ earned and collected $300,000 performing geological-related services and selling its specialized digging tool.

      ______________

   3. GJ purchased some new equipment in February for $53,700. It claimed depreciation on these assets during the year in the amount of $4,510.

      ______________

   4. GJ paid Jacks father $12,000 for services that would have cost no more than $7,000 if Jack had hired any other local business to perform the services. While Jacks dad was competent, he does not command such a premium from his other clients.

      ______________

   5. In an attempt to get his name and new business recognized, GJ paid $9,000 for a one-page ad in the Geologic Survey. It also paid $11,000 in radio ads to be run through the end of December.

Section (circle one): 12:30 / 2:00 / 3:30

______________

6. In November, GJs office was broken into and equipment valued at $6,000 was stolen. The tax basis of the equipment was $6,500. GJ received $4,000 of insurance proceeds from the theft.

   ______________

7. GJ incurred a $5,000 fine from the state government for digging in an unauthorized digging zone.

   ______________

8. GJ reimbursed employee-salespersons $4,200 for meals involving substantial business discussion.

   ______________