Problem 1. Larry Bounds has won the gold bat award for hitting the longest home run in major league baseball this year. The bat is worth almost $35,000. Under what conditions can Larry exclude the award from his gross income? Explain.
Problem 2. Compare and contrast start-up costs and organizational expenditures. Describe how the tax treatment of these expenditures differs from the treatment for financial accounting purposes.
Problem 3. Congress has tried to subsidize the cost of higher education through the federal income tax system. Compare and contrast the operation of the deduction for qualified educational costs and the operation of the deduction for interest on qualified educational loans.
Problem 4. What is an ordinary and necessary business expenditure?