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T11F-Chp-06-1-Business-Expenses-2011

T11F-Chp-06-1-Business-Expenses-2011 - Chapter 6 Business...

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1 Chapter 6 Business Expenses Howard Godfrey, Ph.D., CPA Professor of Accounting UNC Charlotte Copyright © 2011, Dr. Howard Godfrey Edited September 25, 2011.
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2 Part- 1. Entertainment, Auto, Travel, Gifts, Education expense Part-2. Compensation, Bad debts, Qualified production activity expenses, Insurance, Taxes, Legal fees. Part-3. Deductions for AGI- Reimbursed exp. [accountable plans] Deductions of self employed persons, IRAs, [also Roth] Coverdale, Higher education expenses, Student loan expenses,
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3 Meals & Ent. Ded. for AGI Auto Expense Reimb. Expense Travel Self-Employ. Education Retire. Cont. Compen. Ed. Expense Bad Debts Ed. Loans Other Expense Moving Expense Prod. Act. Summary 6. Business Expenses
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4 General Tax Formula Gross Income 110,000 $ Deductions For A.G.I. (10,000) Adjusted Gross Income (AGI) 100,000 Exemptions (7,000) Form 1040-Schedule A Regular Item. Ded. (13,000) Misc. Item. Ded. 5,000 Less 2% of AGI (2,000) Deductible Amount 3,000 Total Deductions From AGI (17,000) Taxable Income 83,000 $
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5 Ent., Auto, Travel, Gift, Ed. Meals & entertainment Auto Expense Travel Expense Education
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Meals & Entertainment. The deduction for business meals and entertainment expenses is limited to 50% of the qualified expenses The 50% limit is imposed on whoever (employer or employee) ultimately pays the expense
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Transportation Expenses . Certain transportation expenses incurred when the taxpayer is not away from home are deductible and include the cost of transportation from one work location to another transportation between home and a temporary work location if the taxpayer has a regular place of business any meal costs are not deductible, however
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Transportation Expenses The prorated business portion of actual auto expenses or a standard mileage rate (51¢ for 2011) plus related parking and tolls can be deducted Commuting expenses (between home and regular place of business) are a personal nondeductible expense
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Documentation Expenses related to Meals, Entertainment, Automobile Usage, Travel, and Business Gifts are deductible subject to limitations and strict documentation requirements Amount Time and place Date and description Business purpose Business relationship of other person(s)
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Depreciation $4,900 Gas, oil, repairs $2,000 Parking and Tolls $1,000 Business miles 15,000 Mileage Rate Auto expense ded.? Auto Expense TP uses auto 100% for bus.
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Depreciation $4,900 Gas, oil, repairs $2,000 Parking and Tolls $1,000 Business miles 15,000 Mileage Rate $0.510 Mileage expense $7,650 Parking and Tolls $1,000 Total Deduction $8,650 TP uses auto 100% for bus.
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Travel Away From Home. Travel expenses incurred for temporary travel away from home on business are deductible. Qualifying expenses include lodging, 50% of meals, transportation to destination and back, and incidental expenses Away from home refers to the person’s tax home ; that is, the location of the principal place of employment regardless of where the family residence is maintained
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Temporary Assignments Temporary is defined as one year or less Employment away from home in a single location that is realistically expected to last (and does in fact
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