Chapter 5 - Chapter 5 Business Deductions Trade or Business...

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Chapter 5 Business DeductionsTrade or Business DeductionsFor expenses to be deductible it must beoIncurred in conduct of a trade or businessoOrdinary; normal, usual, or customary for others in similar business, and notcapital natureoNecessary: prudent businessperson would incur same expenseExpenditures Contrary to Public PolicyDeductions are disallowed for certain specific types of expenditures that are consideredcontrary to public policyoPenalties, fines, illegal bribes or kickbacks, two-thirds of treble damage paymentsfor violation of anti-trust lawExpenses Relating To An Illegal BusinessUsual expenses of operating an illegal business are deductibleoHowever, deduction for fines, bribes to public officials, illegal kickbacks, and otherillegal payments are disallowedTrafficking in controlled substances: only cost of goods can reduce gross incomePolitical Contributions And Lobbying ActivitiesGenerally, no business deduction is allowed for payments made for political purposes orfor lobbyingoExceptions are allowed for lobbyingTo influence local legislationsTo monitor legislation, andDe minimis in-house expenses (limited to $2000)Excessive Executive CompensationFor publicly held corporations:oDeduction for compensation of CEO and four other highest compensated officersis limited to $1 million each

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Term
Fall
Professor
fabioambrosio
Tags
Accounting, Business, Depreciation, Expense, Generally Accepted Accounting Principles

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