Questions On Income And Expenses

Only those personal expenditures that are allowed by the tax law are deductible as itemized deductions.

Which of the following is not a required test for the deduction of a business expense?

This distinction is important, as a business is allowed to deduct items such as travel, tool and home office expenses.

better to take a full advantage of reporting the income and report the business expenses as

With regards to expenses, ensure that your perform a in depth review of expenses incurred over the two years and if they are both necessary and ordinary then they can be deducted for your annual income.

Is the business that you are investing in a Partnership, C Corporation, Sole Proprietorship, Limited Liability Corporation, or an S Corporation? If you are investing into a Partnership you may not deduct a partnership expense you pay with your own funds, unless you are required to do so pursuant to the partnership agreement or customary practice. Johnson v Commr, TC Memo 1984-598. Therefore, it may be in your best interest to avoid paying out of your pocket for partnership expenses that are reimbursable by the partnership, including but not limited to; travel, meals, entertainment, and continuing legal education. Id.

A taxpayer bears the burden of proving his entitlement to a business expense deduction. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933); Burrus v. Commissioner, T.C. Memo. 2003-285. Section 7491(a) provides that the burden of proof shifts to respondent under certain specified conditions. Section 162 provides that a taxpayer who is carrying on a trade or business may deduct ordinary and necessary expenses incurred in connection with the operation of the business. Section 212 provides a deduction for expenses paid or incurred in connection with an activity engaged in for the production or collection of income, or for the management, conservation, or maintenance of property held for the production of income. For the expenses to be deductible under IRC § 162 or 212, the taxpayer must engage in or carry on an activity to which the expenses relate with an actual and honest

IRC Sec. 213(a) states that “there shall be allowed as a deduction the expenses paid

The tax law allows to deduct the travel fares because they are qualified as necessary expense related to the taxpayer’s profession. Thus, Mona can elect to treat of the $8,000 as expense.

Discussion of the Law: There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including—(1)a reasonable allowance for salaries or other compensation for personal services actually rendered;

You may not have been gainfully employed or have worked very little or not at all in the

IRC 162(a) requires the expense to be paid or incurred during the current taxable year. The taxpayer must also have the necessary documents to support this deduction. It is worth noting that the taxpayer has the burden of proof and is expected to show that he/she is entitled to the business deductions. IRC 7491 (a) provides that the burden of proof shifts to the IRS when the

These deductions are limited to a certain, age-dependent percentage. If you’re under 65, then you can deduct expenses greater than 10% of your adjusted gross income (AGI). If you’re 65 or older, this is cut down to 7.5% of your AGI. You can also itemize any charitable donations you made within the past year. Helping political campaigns or needy families aren't considered “charitable”, and the amount you can deduct depends on how you make the donation. If you donate in cash, then the deduction can be up to 50% of your AGI. If you make a property donation, then it’s 30%. A final form of itemized deductions takes the form of small expenses, but you can only deduct the portion that exceeds 2% of your AGI. These deductions can include uniform expenses, business or education expenses, professional journal subscriptions, fees for tax preparation, or other similar

On 1 July 2011, Kookaburra Ltd acquired an item of plant at a cost of $200 000. The plant has an

Social security cards for you, your spouse, and your dependents. If you or your dependent is not eligible to get a Social Security Number, you may need to obtain an Individual Taxpayer Identification Number (ITIN).