Accounting Question

Your assignment is to prepare a one-page (approximately) statement ofreasons the suggested answer is correct. Cite the relevant section(s) of the Internal Revenue Code thatmay apply and any other authorities such as IRS guidance. Your opinion, based on facts and authorities,is very welcome.

Question:

A real estate broker reported the following business income and expenses for the current year:

Commission income $100,000

Expenses:

Auto rentals 2,000

Referral fees to other brokers (legal under state law) 20,000

Referral fees to non-brokers (illegal under state law) 8,000

Parking fines 200

What amount should be reported on Schedule C, Profit or Loss from Business?

A. $69,800

B. $70,000

C. $77,800

D. $78,000