Jack, a geologist, opened a business organized as a Ccorporation called Geo-Jack (GJ) in January of this year. Jackis the sole shareholder. Assume GJ reports on a calendaryear and uses the accrual method of accounting. Foreach item below, indicate its effect on Jack’s taxable income andyou must clearly indicate whether it is positive or negative.
- In an attempt to get his name and new business recognized, GJpaid $9,000 for a one-page ad in the Geologic Survey. Italso paid $11,000 in radio ads to be run through the end ofDecember.
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- In November, GJ’s office was broken into and equipment valuedat $6,000 was stolen. The tax basis of the equipment was $6,500. GJreceived $4,000 of insurance proceeds from the theft.
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- GJ incurred a $5,000 fine from the state government for diggingin an unauthorized digging zone.
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- GJ reimbursed employee-salespersons $4,200 for meals involvingsubstantial business discussion.
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