THE-WFT08-06-1001-ch_05_V4-SM

THE-WFT08-06-1001-ch_05_V4-SM - CHAPTER 5 BUSINESS...

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CHAPTER 5 BUSINESS DEDUCTIONS SOLUTIONS TO PROBLEM MATERIALS Status: Q/P in Question/ Present Prior Problem Topic Edition Edition 1 Issue recognition Unchanged 1 2 Illegal activities Unchanged 2 3 Ethics problem Unchanged 3 4 Political contributions Unchanged 4 5 Lobbying expenditures Unchanged 5 6 Losses between related parties New 7 Tax-exempt income/expenses Unchanged 7 8 Reasonable salaries Unchanged 8 9 Political contributions Unchanged 9 10 Investigation of a business Modified 10 11 Losses between related parties Unchanged 11 12 Charitable contributions of corporation; New carryover 13 Charitable contributions deduction of accrual Unchanged 13 basis corporation 14 Research expenditures Unchanged 14 15 Production activities deduction (PAD): Modified 15 tax benefit 16 Production activities deduction (PAD): qualified New production activities income (QPAI) and W-2 wage limit 17 Cost recovery allowed and allowable Unchanged 17 18 MACRS for personalty Unchanged 18 19 MACRS for realty Unchanged 19 20 MACRS for realty Unchanged 20 21 Farm property New 22 Leasehold improvement property New 23 MACRS for realty Unchanged 21 24 MACRS and § 179 expensing Modified 22 25 MACRS and § 179 expensing Modified 24 26 MACRS for personalty: mid-quarter convention Modified 25 and § 179 expensing 5-1
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5-2 2008 Entities Volume/Solutions Manual Status: Q/P in Question/ Present Prior Problem Topic Edition Edition 27 Listed property and § 179 deduction: not Modified 26 passenger automobile 28 Listed property: luxury auto Unchanged 27 29 Listed property: luxury auto Modified 28 30 Listed property: recapture and luxury auto Modified 29 31 Alternative minimum tax cost recovery New 32 Alternative depreciation system versus New MACRS 33 Amortization of goodwill Unchanged 32 34 Ethics problem Unchanged 33 35 Depletion Unchanged 34 Bridge Discipline Problem 1 Lease vs. buy decision Unchanged 1 2 Lease vs. buy decision Unchanged 2 3 Book income and taxable income calculation Unchanged 3 Research Problem 1 Ordinary and necessary New 2 Cost recovery or amortization: eligibility Unchanged 2 3 Cost recovery: personalty versus realty New 4 Cost recovery availability Unchanged 4 5 Start-up expenditures Unchanged 5 6 Internet activity Unchanged 6 7 Internet activity Unchanged 7
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Business Deductions 5-3 PROBLEMS 1. The two issues involved are whether the payment should be made and, if made, is it deductible. If made to the representatives of a U.S. government, it would be a bribe. Not only would it be nondeductible, it could result in criminal charges. If the payment is made to the representative of the foreign country, more than likely, it would be an accepted trade practice in that country. In this case, since the payment would not violate the U.S. Foreign Corrupt Practices Act of 1977, it would therefore be deductible. pp. 5-6 and 5-7 2. Only c., the price paid for drugs purchased for resale. Whether the business is legal or illegal, cost of goods sold is allowed as a reduction from total sales in arriving at gross income from the
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This note was uploaded on 04/19/2009 for the course BUSINESS ACCT 305 taught by Professor Poletti during the Spring '09 term at DeVry Columbus North.

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THE-WFT08-06-1001-ch_05_V4-SM - CHAPTER 5 BUSINESS...

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