CHAPTER 5 NOTES - CHAPTER 5 NOTES TAX 4001 Spring 2010...

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CHAPTER 5 NOTES TAX 4001 Spring 2010
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MAJOR CONCEPTS EXPENSES DIALLOWANCE POSSIBLIITES RELATED PARTY TRANSACTIONS BUSINESS INVESTIGATION COSTS DOMESTIC PRODUCTION ACTIVITIES  DEDUCTION CHARITABLE CONTRIBUTIONS DEPRECIATION/AMORTIZATION
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ORDINARY AND NECESSARY BUSINESS  EXPENSES MUST BE BUSINESS OR PROFIT  RELATED NO Deduction for personal expenses or  entertainment Must be reasonable When deductible Cash Method – when paid (even with borrowed  funds) Accrual – economic performance (liability incurred  and determined)
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DISALLOWANCE POSSIBLITIES Public Policy Limitations Two-thirds of treble damage payments in  antitrust suits Relationship of legal fess to trade or  business Expenses related to illegal businesses Political Contributions $2,000 of in house costs)
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RELATED PARTY TRANSACTIONS Losses disallowed, but may offset gain  realized on  subsequent  sale to third  parties Expenses between accrual and cash basis 
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CHAPTER 5 NOTES - CHAPTER 5 NOTES TAX 4001 Spring 2010...

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