Rex, a cash basis calendar year taxpayer, runs a bingo operation which is illegal under state law. During 2016, a bill designated H.R. 9 is introduced into the state legislature which, if enacted, would legitimize bingo games. In 2016, Rex had the following expenses:

Operating expenses in conducting bingo games $127,000

Payoff money to state and local police 34,000

Newspaper ads supporting H.R. 91 3,000

Political contributions to legislators who support H.R. 9 18,000

Of these expenditures, Rex may deduct: Please select the correct answer and why (include a brief description).

a.$127,000.
b.$214,000.
c.$227,000.
d.$282,000.
e.None of the above.