自制note chapter 7.docx

自制note chapter 7.docx - Part Three The Measurement of...

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Part Three: The Measurement of Taxable Income Chapter Three: Property Acquisitions and Cost Recovery Deduction LO 7-1. Decide if a business expenditure should be deducted or capitalized. LO 7-2. Define tax basis and adjusted basis. LO 7-3. Explain how leverage can reduce the after-tax cost of assets. LO 7-4. Compute cost of goods sold for tax purposes. LO 7-5. Describe and apply the MACRS framework. LO 7-6. Determine the limitation on depreciation of passenger automobiles. LO 7-7. Calculate the Section 179 deduction and bonus depreciation. LO 7-8. Incorporate depreciation deductions into the NPV computation. LO 7-9. Explain how the cost of intangibles is recovered through amortization. LO 7-10. Distinguish between cost depletion and percentage depletion. LO 7-11. Explain cost recovery–related book/tax differences and their effect on GAAP financial statements. . 一、 DEDUCTIBLE EXPENSE OR CAPITALIZED COST? Federal courts have consistently ruled that expenses related to raising capital or reorganizing a firm’s capital structure benefit the firm for the duration of its existence and are not deductible. ( ) Repairs and Cleanup Costs Repair and maintenance costs that are regular and recurring in nature and do not materially add to either the value or the useful life of an asset are deductible. (Capital improvement (increase the value, make the life longer) is not deductible) cleanup cost 例子一 买了好的土地,自己污染了,自己弄好,属于恢复 maintain, deductible. 例子二, 买到了污染的土地 , 自己弄好,属于改良 , not deductible. The regulations provide important safe harbors permitting deductibility of (1) de minimis expenditures For corporations producing public financial statements, the per-item maximum is $5,000. For taxpayers without such financials, the per-item maximum is $500. ( 单 价 低 于 这 些 数 值 的 tangible property 的 购 买 , deductible) (2) routine maintenance (3) certain building improvements by qualifying small taxpayers (二) Deductions of Capital Expenditures as Subsides Research and experimental expenditures are deductible. Advertising costs are deductible. Industry Specific deductions: Farmers can deduct soil and water conservation ( 保护 ) expenditures, and the cost of fertilizers. 1
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Oil and gas producer can deduct intangible drilling and development costs (IDC) of wells. 二、 THE CRITICAL ROLE OF TAX BASIS tax basis : a taxpayer’s investment in any asset or property right—the measure of unrecovered dollars represented by the asset. (一) Basis, Cost Recovery, and Cash Flow When a firm deducts a portion of the capitalized cost of an asset, the deduction has two consequences. The first consequence is that the asset’s initial tax basis is reduced by the deduction. The reduced basis is called the asset’s adjusted basis .
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