Using the tests for deductibility, explain why the following expenses may not be fully deductible in the
Question:
Using the tests for deductibility, explain why the following expenses may not be fully deductible in the current year.
a. Janet pays $900 in interest on the debt she incurred to purchase municipal bonds. The bonds pay $1,500 of interest in the current year.
b. Andrew owns a retail-clothing store. Andrew has the opportunity to obtain a franchise to operate a discount sporting goods store. He spends $5,000 investigating the possibility of opening a sporting goods store in a neighboring town.
c. Jane owns a fitness center. She employs the star basketball player at Local University as an aerobics instructor. Because of his reputation, she pays him $20 an hour. Jane pays her other aerobics instructors $10 an hour.
d. Alvin makes a vacation trip to Florida, and while there spend two days investigating the feasibility of opening up a new office of his optometry practice.
Introduction to Corporate Finance What Companies Do
ISBN: 978-1111222284
3rd edition
Authors: John Graham, Scott Smart