. B is bookie in a state where gambling is illegal. During the year, he earned...
. B is bookie in a state where gambling is illegal. During the year, he earned $70,000 accepting bets. His expenses included those for rent, phone, and utilities. In addition, he paid off a state legislator who was a customer and who obviously knew of his activity.
a. Discuss the tax treatment of B’s income and expenses.
b. Same as (a) except B was a drug dealer.
Homework Answers
a. the tax treatment of B's income as he earned $ 70,000 in illegal manner. So this income is taxable in other sources at a flat rate 30%. so tax will be $ 70,000*30%= $ 21,000. After deducting this tax of $ 21,000 the balance amount of $ 49,000 will be his income and from this he can do expenses.
b. the answer will remain same as in case a above.
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