Taxation of Illegal Income in the U.S.


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Why would a business owner declare income gained from embezzlement?

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1. Which of the following could be an illegal deduction, and cannot be claimed on taxes?

2. Which of the following should be declared on your 1040?

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About This Quiz & Worksheet

Why do you think a business owner would declare income gained through embezzlement? This quiz and worksheet will check your answer to this question and other questions related to taxing illegal income.

Quiz & Worksheet Goals

Taking this quiz will gauge what you know about the following:

  • Reason why a business owner would declare income from embezzlement
  • An illegal deduction that cannot be claimed on taxes
  • Example of illegal income that should be declared on a 1040
  • Potential consequences of not declaring income from illegal activities
  • Income and expenses related to the sale of drugs

Skills Practiced

  • Knowledge application - use your knowledge to answer questions about taxing illegal income
  • Interpreting information - verify that you can read information about an illegal deduction that cannot be claimed on taxes and interpret it correctly
  • Information recall - access the knowledge you've gained regarding income from embezzlement

Additional Learning

To continue your studies on this topic, be sure to review the related lesson titled Taxation of Illegal Income in the U.S. Here's the type of information you'll find in this lesson:

  • Overview of what items are tax deductible
  • How the Fifth Amendment relates to declaring illegal income
  • An example of imprisonment for tax evasion as a result of illegal activities