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Unformatted text preview: Chapter 8 Business Deductions and Accounting Methods I. General business deductions A. Three requirements (1) Ordinary periodic, related business activity (2) Necessary appropriate and helpful to the taxpayers business activity (3) reasonable in amount near fair market value B. Limitations on business deductions - 162 Expenditures against public policy (fines and penalties for illegal activities) Political contributions and lobbying costs Capital expenditures (cant deduct total immediately) Expenses for producing tax expense income (expenses on muni-bonds) Personal expenditures C. Mixed motive expenditures (1) M&E (covered in Ch. 6 ) generally 50% deductible (exception qualified plan, er limited to 50%, non-qualified, ee limited to 50%) (2) Travel & transportation generally deductible, though transportation only deductible if primary purpose of trip is business (3) Property use (computer, cars, phones) must allocate expenses between business & personal Transportation Expenses direct cost of transporting TP to and from business sites (not including commute) Travel Expenses Deductible if away from tax home overnight Must be for a bona fide business purpose if over 50% business, you can deduct ALL transportation costs; other expenses must be prorated EXAMPLE 1: You are self-employed and you take a trip. The trip is 6 days total and 4 You are self-employed and you take a trip....
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This note was uploaded on 05/26/2011 for the course ACCT 5400 taught by Professor Staff during the Spring '08 term at University of Georgia Athens.
- Spring '08