For each of the following situations, determine the deduction concepts involved, and explain how…

For each of the following situations, determine the
deduction concepts involved, and explain how they form the basis for the tax
treatment described:

a. Individuals are allowed to deduct medical expenses.

b. Happy Burgers, Inc., owns a chain of drive-in restaurants
in California. Seeking to expand its operations, Happy spends $90,000 investigating
locations in Oregon. Happy decides that expanding into Oregon is not a wise
move, but it is allowed to deduct the $90,000.

c. Lage’s Licorice Company suffers a fire in one of its
warehouses. Equipment that cost $40,000 and that had been
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For each of the following situations, determine the
deduction concepts involved, and explain how they form the basis for the tax
treatment described:

a. Individuals are allowed to deduct medical expenses.

b. Happy Burgers, Inc., owns a chain of drive-in restaurants
in California. Seeking to expand its operations, Happy spends $90,000 investigating
locations in Oregon. Happy decides that expanding into Oregon is not a wise
move, but it is allowed to deduct the $90,000.

c. Lage’s Licorice Company suffers a fire in one of its
warehouses. Equipment that cost $40,000 and that had been depreciated $15,000
is destroyed. The equipment, which cost $50,000 to replace, is uninsured. Lage is
allowed to deduct a loss of $25,000 on the equipment.

d. While Ray is out to dinner one night, someone breaks into
his personal car. The thief steals his stereo and his golf clubs. The fair market
value of the items stolen is $300. Because he has a $500 deductible on his insurance
policy, he receives no reimbursement from his auto insurance. To make matters
worse, no tax deduction for his loss is allowed.

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