CHAPTER 5 Notes

CHAPTER 5 Notes - CHAPTER 5 NOTES TAX 4001 2011/2012 MAJOR...

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CHAPTER 5 NOTES TAX 4001 2011/2012
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MAJOR CONCEPTS ORDINARY & NECESSARY BUSINESS 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 personal losses, i.e., 50% of meals & 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 Lobbying (OK for local, monitoring, & if under $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
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CHAPTER 5 Notes - CHAPTER 5 NOTES TAX 4001 2011/2012 MAJOR...

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