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. 1- Joshua Stark, a realtor, paid $5,000 to Shady Grove Apartments, Inc. as a referral fee for referring
customers to him. One of his competitors complained to the local Realtors Board that these payments were
kickbacks, deemed unethical conduct by the Board. The Board agreed with his competitor but noted that
the payments were not illegal under federal law, and local laws against such fees have not been enforced
for several years. Thus, the Board indicated that it would write a letter to Joshua explaining its view that
the payments are unethical, but that there was really little else that either it or the competitor could do.
Joshua countered to the Board that he would prefer not to make the payments, but that such payments are a
common practice among realtors in the city, and that his business would suffer if he did not make them as
well. Can Joshua deduct the payments on his federal income tax return? Explain why or why not.
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