Business Deductions Ch04

Business Deductions Ch04 - CHAPTER 7 PROPERTY TRANSACTIONS:...

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CHAPTER 4 BUSINESS DEDUCTIONS SOLUTIONS TO PROBLEM MATERIALS Status: Q/P Question/ Present in 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 and political contributions Unchanged 5 6 Issue recognition Unchanged 6 7 Tax-exempt income/expenses Modified 7 8 Reasonable salaries Unchanged 8 9 Lobbying expenses Unchanged 9 10 Investigation of a business Unchanged 10 11 Losses between related parties Modified 11 12 Charitable contributions of corporation; carryover Unchanged 12 13 Charitable contributions deduction of accrual Unchanged 13 basis corporation 14 Research expenditures Modified 14 15 Cost recovery allowed and allowable Unchanged 15 16 MACRS for personalty Unchanged 16 17 MACRS for realty New 18 MACRS for realty Unchanged 18 19 ACRS for realty Modified 19 20 MACRS and § 179 expensing New 20 21 § 179 expensing and carryforwards Unchanged 21 22 MACRS and § 179 expensing New 23 MACRS for personalty: mid-quarter convention Modified 23 and § 179 expensing 24 Listed property and § 179 deduction: Unchanged 24 not passenger automobile 25 Listed property: luxury auto New 26 Listed property: luxury auto Unchanged 26 27 Listed property: recapture and luxury auto Unchanged 27 4-1 Status: Q/P
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4-2 2003 Entities Volume/Solutions Manual Question/ Present in Prior Problem Topic Edition Edition 28 Listed property and § 179 deduction: Unchanged 28 production of income use 29 Listed property: leasing Modified 29 30 Amortization of goodwill Unchanged 30 31 Ethics problem Unchanged 31 32 Depletion Unchanged 32 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 Start-up expenditures Unchanged 1 2 Independent investor test New 3 Cost recovery convention Unchanged 3 4 Cost recovery availability Unchanged 4 5 Cost recovery period New 6 Internet activity Unchanged 6 7 Internet activity Unchanged 7 PROBLEM MATERIAL 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. governement, 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. 4-7 and 4-8 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 business. Thus, cost of goods sold is treated as a negative income item rather than as a deduction. p. 4-8 3. From a legal perspective, Cardinal is responsible for having its drivers break the law by
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This note was uploaded on 01/24/2010 for the course ACCT 44 taught by Professor Smithysmith during the Spring '10 term at DeVry Chicago.

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Business Deductions Ch04 - CHAPTER 7 PROPERTY TRANSACTIONS:...

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