Day _12 ACIS3314 Spring 2011 Deductions for AGI

Day _12 ACIS3314 Spring 2011 Deductions for AGI - ACIS 3314...

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ACIS 3314, Day 12 1 Deductions 1: Deductions for AGI ACIS 3314 Tax Impact on Decisions Learning Objectives 1. Identify the common deductions necessary for calculating adjusted gross income (AGI) in the following categories: Directly related to profit-motivated activities Indirectly related to profit-motivated activities Deductions subsidizing specific activities 2. Distinguish between ―trade or business‖ and ―investment‖ activities. Overview of Expenses: Individuals Did the expenditure arise in a profit-motivated activity? Rental Activity ―Trade or Business‖ Activity Investment Activity • Generally for AGI • Self-Employment (SE) Tax • For AGI • No SE Tax • From AGI • 2% AGI Floor YES • For AGI? • From AGI? NO Non- Deductible Personal Expenses Specifically Allowed Deductions
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ACIS 3314, Day 12 2 § 162 – Trade or Business Expenses Permits deduction of all ― ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business …‖ Five conditions must be met to qualify for a deduction 1. Expense (as opposed to a capital expenditure). 2. Ordinary 3. Necessary 4. Paid or incurred during the taxable year 5. Made to carry on a trade or business . § 162 – Trade or Business Expenses Ordinary —an expense is ordinary if it is – – Normal, usual, or customary in the type of business conducted by the taxpayer, and – Not capital in nature. – Ordinary expenses need not be recurring in order
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This note was uploaded on 08/22/2011 for the course ACIS 3314 taught by Professor Hicks during the Spring '09 term at Virginia Tech.

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Day _12 ACIS3314 Spring 2011 Deductions for AGI - ACIS 3314...

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