Chapter 5 HW Solutions

Chapter 5 HW Solutions - 5 Timing of Expense Deduction...

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5. Timing of Expense Deduction Solution: Businesses are not permitted to use reserves for expenses for tax purposes. Aloha can only deduct the repair expenses in the year the repairs are performed, if it is an accrual-basis taxpayer, or when they are paid, if it is a cash-basis taxpayer. 6 . Business Investigation Expenses Solution: Diane can deduct the $1,900 ($1,600 + $300) in the current year as business investigation expenses. Diane can deduct this amount because she is already in the clothing business and expenses for potential expansion are ordinary business expenses whether or not a new store is opened. Her brother, however, is not permitted any deduction for the $1,900 that he expended. Cameron could only deduct the $1,900 (along with start-up expenses not exceeding $5,000 in total) if the new store was opened. 19. Expenses Related to Tax-Exempt Income Solution: Mary is allowed no interest deduction because the loan proceeds were used to invest in tax-exempt securities. 20.
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This note was uploaded on 02/26/2012 for the course ACTG 470 taught by Professor Staff during the Spring '10 term at Oregon.

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Chapter 5 HW Solutions - 5 Timing of Expense Deduction...

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