Kitty Runs a Brothel (Illegal Under State Law) and Has

Essay

Kitty runs a brothel (illegal under state law) and has the following items of income and expense.What is the amount that she must include in taxable income from her operation? $$\begin{array} { l l r } \text { Income } & & \$ 200,000 \\\text { Expenses: } & & \\& \text { Rent } & 8,000 \\& \text { Utilities } & 2,000 \\& \text { Bribes to police } & 10,000 \\& \text { Office supplies } & 5,000 \\& \text { Legal fees } & 20,000 \\& \text { Depreciation } & 14,000 \\& \text { Illegal kickbacks } & 15,000\end{array}$$