tailieunhanh - Lecture Taxation of individuals and business entities 2015 - Chapter 8: Business income, deductions, and accounting methods

After studying this chapter you will be able to: Describe the general requirements for deducting business expenses and identify common business deductions, apply the limitations on business deductions to distinguish between deductible and nondeductible business expenses, identify and explain special business deductions specifically permitted under the tax laws,. | Chapter 8 Business Income, Deductions, and Accounting Methods 1 Learning Objectives Describe the general requirements for deducting business expenses and identify common business deductions. Apply the limitations on business deductions to distinguish between deductible and nondeductible business expenses. Identify and explain special business deductions specifically permitted under the tax laws. Explain the concept of an accounting period and describe accounting periods available to businesses. Identify and describe accounting methods available to businesses and apply cash and accrual methods to determine business income and expense deductions. 2 Business income and deductions Schedule C – Trade or business income Includes revenue from services and sales activities. Gross profit from sales - cost of goods is a return of capital. Business income does not include excluded and deferred income. Deductions must be directly connected to business activity. Ordinary and necessary means . | Chapter 8 Business Income, Deductions, and Accounting Methods 1 Learning Objectives Describe the general requirements for deducting business expenses and identify common business deductions. Apply the limitations on business deductions to distinguish between deductible and nondeductible business expenses. Identify and explain special business deductions specifically permitted under the tax laws. Explain the concept of an accounting period and describe accounting periods available to businesses. Identify and describe accounting methods available to businesses and apply cash and accrual methods to determine business income and expense deductions. 2 Business income and deductions Schedule C – Trade or business income Includes revenue from services and sales activities. Gross profit from sales - cost of goods is a return of capital. Business income does not include excluded and deferred income. Deductions must be directly connected to business activity. Ordinary and necessary means conducive to profit generation. Reasonable in amount means not extravagant. 3 Note Hobbies are not businesses. Personal activity that may generate revenue. Taxpayer generally has burden of proving their intent to make a profit. Specific factors listed in Regulations such as: History of income or loss Elements of personal pleasure or recreation Deductions only allowed to extent of revenue. Reasonableness example Rick owns a business that employs his brother, Ben. Ben is paid $45,000 per year by Rick’s business. In comparison, other employees with Ben’s responsibilities are only paid $30,000 per year. What is Rick’s business deduction for employing Ben? 4 Statutory limits on business expense deductions Expenses against public policy No deduction for fines, bribes, lobby expenditures, or political contributions Expenses relating to tax-exempt income Interest on loan where proceeds invested in municipal bonds. Key man insurance premiums – no deduction if business is beneficiary of life .

• Quy hoạch - Đô thị
• Business entities
• Individual taxation
• Multijurisdictional taxation
• Transfer taxes
• Business income
• Accounting methods
• Urban market business entities
• Competitiveness of urban market business entities
• Market business entities
• Organization and management capacity
• Finance competence and business performance
• Essentials of taxation
• Business tax credits
• Corporate alternative minimum tax
• Limited liability entities
• Profits and distributions
• Entity legal classification
• Nontax characteristics
• Operating partnerships
• Flow through entities
• The financial statements
• Business deductions
• Financial statements
• Loss limitations
• Property transactions
• Corporate taxation
• Nonliquidating distributions
• Corporate formation
• Taxable acquisitions
• Partnership interests
• Partnership distributions
• Operating distributions
• Post termination transition period
• Local taxes
• Income taxes
• Multinational transactions
• Taxing multinational transactions
• Wealth planning
• Tax rate structures
• Federal taxes
• Tax compliance
• Tax authorities
• Tax planning strategies
• Related limitations
• Individual income tax
• Filing status
• Gross income
• Recognize income
• Individual deductions
• Deductions for AGI