CACC522-Week03-text

CACC522-Week03-text - CACC522Week03 20:13...

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CACC522-Week03 20:13 Frequent Flier points – taxable when on employers credit card and declared. hard to track from an administrative issue property acquisition – purpose of purchase is evaluated long term benefit (capital) – Capital Gain  - disposition Inventory (resale) – business look at behavior to assess whether it is capital gain or business income. no definition in the act to determine if capital gain or business income determined by case law Business income Financial Statements that show true picture of profit for your type of business. Do not need to be GAAP GAAP uses accrual method o Tax is ok with accrual method of revenue recognition o Tax does not agree with accruing expenses until legally obligated to pay them o Rules to include expenses expense incurred for the purpose of earning income
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disallow personal or living expense cannot use expenses to reduce tax exempt earnings lottery winnings not taxable cannot deduct ticket costs life insurance is tax free so premiums are not deductible Any expense that is a reserve – estimate Exceptions Bad debt expense – allowance for doubtful accounts o must be reasonable deferred payment arrangements Reasonability Cannot be on account of capital must use CCA – Capital Cost allowance rules in tax act instead of amortization specific limits lease 800/mo.
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