Chapter 6.pptx - Chapter 6: Individual Deductions 1...

Chapter 6: Individual Deductions
Instructed by: Kelly Wentland
1

Ch. 6 Videos Outline

Lecture video 1 – general info on two deduction
categories and distinguishing “ For AGI
Deductions”

Lecture video 2 – distinguishing “ From AGI
Deductions” and where deductions go in tax
forms

Remaining videos – Ch. 6 – in-class exercises
2

My goal with the slides today…

My note sheets give a table of the details to use in your
assignment and for the midterm.

However, a list of details can often be hard to remember. So…

My goal with the slides is to try to give you a means of
grouping expenses into broader categories conceptually
to help with remembering how the categories are classified
in reducing taxable income.

The general rules for a category help for many of the detailed
rules. But, there are always exceptions that you may just have
to memorize because they don’t perfectly fit the format….
o
that’s just the complexity of tax law.
3

First goal – decide if FOR or
FROM AGI
One way to help classify them is to group the
activities generating the expenses by type and
remembering which type typically fits under
each category of deduction.
Your book starts by grouping activities into
“business-related” or “investment-related.”
4

Understand the difference
between business and
investment activities

Both are for profit, but…

Trade or business activities require a relatively high involvement or
effort from the taxpayer whereas investment activities don’t require

Ex: self-employed business activity

Investment activities involve investing in property for appreciation
or for income payments.

Ex: owning stocks (investment in a C corp), a partnership interest (flow-
through entity income), rentals and intangible assets that bring in
royalties

Professor Wentland adds: investments in education
5