Corporations: Organization, Capital Structure, and Operating Rules
CORPORATIONS: ORGANIZATION, CAPITAL STRUCTURE,
AND OPERATING RULES
Chestnut Corporation had $300,000 operating income and $150,000 operating expenses
Losses and Loss Limitations
No Bad Debt Deduction for Cash Basis Taxpayers
Non-Business Bad Debt
Treat as a Short-Term Capital Loss (Net Capital Losses limited to $3000
Combat practice of dedu
Chapter 5 (Partial)
Deductions and Losses: In General
Income definition is all-inclusive.
Deductions are by legislative grace.
The term "deduction" is a much broader, and legalistic term than "expense."
Individuals as Employees and Proprietors
Self Employed vs. Employee Status
Expenses of self-employed are deductible "for" AGI
Expenses of Employee are deductible "from" AGI unless
reimbursed and included in W-2
Section 262 specifically disallows personal expenditures as deductions.
However, some are deductible due to specific legislative sanction as
I. Medical Expenses
A deduction is allowed for non-reimburs
Tax Formula (Individuals)
Income (Gross Receipts except for return of capital)
- Exclusions (Tax exempt income)
Gross Income (Sect. 61-All income from whatever source derived, unless exempt by code)
Working With the Tax Law
Tax Law is a mosaic of statutory provisions, administrative
pronouncements, and court decisions, all having different weights.
The body of knowledge changes daily as new court decisions are added,
By D ANIEL J. MITCHELL
There is growing interest in Washington in a new national consumption tax, otherwise known as a valueadded tax or VAT. Senate Budget Committee Chairman Kent Conrad (D., N.D.), for example, recently told
the Washington Post that "a V
FLAT TAX-Steve Forbes
Defined: One rate (17%) on personal income and corporate profits. No capital-gains,
estate tax, or AMT. Write off fixed assets immediately. Generous exemptions for each
adult and child (family of four would pay no federal tax on firs