Answered: Describe what the IRS means by “both… | bartleby

CONCEPTS IN FED.TAX.,2020-W/ACCESS

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter5: Introduction To Business Expenses

Section: Chapter Questions

Problem 28P

See similar textbooks

Related questions

Question

Describe what the IRS means by “both ordinary and necessary.”

Tax code 280e was created in 1982 after Jeffrey Edmondson, a Minneapolis-based
man who dealt amphetamines, cocaine, and marijuana, won a lawsuit against the
IRS to claim business expenses.
During the taxable year of 1974, Edmondson received 1.1 million amphetamine
pills, 100 pounds of marijuana, and 13 ounces of cocaine from a supplier on
consignment. Edmondson reported on his 1974 return that his cost of goods sold
for these products was $105,300, itemizing deductions, which included a couple
thousand miles he put on his automobile, the cost of a scale to weigh his product,
packaging costs, a couple hundred dollars in long-distance and local business calls
and a portion of his rent for his home office.
The court decided that he was entitled to "both ordinary and necessary" business
expenses in 1981. The next year, however, Congress passed tax code 280e,
banning businesses that trafficked Schedule I or Schedule II substances from
taking business expenses besides the cost of goods sold.

Expert Solution

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Blurred answer

Similar questions

36 ZZZ is engaged in a VAT-business and a non-VAT business. Her records show the following data, no tax included, for the taxable year: Sales From VAT business P 6,000,000 From non-VAT business 4,000,000 Purchases of goods For VAT business from VAT suppliers 3,000,000 For non-VAT business 2,000,000 Purchases from VAT suppliers of supplies used for VAT and non-VAT Business 30,000 Expenses incurred for both VAT and non-VAT business (70% of these expenses were paid to VAT-registered enterprises) 100,000 The VAT payable is:
Haru is a self-employed cash - method, calendar - year taxpayer who made the following cash payments related to his business this year. Calculate the after-tax cost of each payment assuming Haru has a 37 percent marginal tax rate. Note: Do not round intermediate calculations and round your final answer to the nearest whole dollar amount. a. $1,800 fine for speeding while traveling to a client meeting.
May Yaman is engaged in a VAT-business and a non-VAT business. Her records show the following data, no tax included, for the taxable year: Sales From VAT business P6,000,000 From non-VAT business 4,000,000 Purchases For VAT business from VAT suppliers 3,000,000 For non-VAT business 2,000,000 Purchases from VAT suppliers of supplies used for VAT and non-VAT business 30,000 Expenses incurred for both VAT and non-VAT business (70% of these expenses were paid to VAT-registered enterprises) 100,000 The VAT payable is: Group of answer choices
Marvin sells computer equipment and is objecting to an assessment received from SARS. During the current year of assessment (28 February), Marvin donated second-hand office equipment to a local radio station. In return, the radio station agreed to broadcast 'specials' that Marvin had on certain computer products for the week. SARS taxed the value of the office equipment donated to the radio station and stated that the donation fell within the definition of gross income. Marvin believes otherwise. YOU ARE REQUIRED: Discuss all the gross income requirements that Marvin should bear in mind when preparing the objection of the assessment. (Assume that Marvin is a resident of the Republic.)
1. Jessie is a non-VAT seller of goods. Since he has no official receipts or invoices to support his expenses, he opted for the Optional Standard Deduction (OSD). When he filed his income tax return, he intentionally applied the rate of 20% on his gross sales. In this case, Jaime applied this type of scheme: a. Capitalization b. Shifting c. Evasion d. Avoidance
Jaime is a non-VAT seller of goods. Since he has no official receipts or invoices to support his expenses, he opted for the Optional Standard Deduction (OSD). When he filed his income tax return, he intentionally applied the rate of 20% on his gross sales. In this case, Jaime applied this type of scheme: Capitalization Shifting Evasion Avoidance
Compute the penalty described for the following taxpayers. If an amount is zero, enter "0". If required, round your answers to two decimal places. a. Wilson filed his individual tax return on the original due date but failed to pay $630 in taxes that were due with the return. If Wilson pays the taxes exactly 3 months late, calculate the amount of his failure-to-pay penalty.$ b. Joan filed her individual income tax return 5 months after it was due. She did not request an extension of time for filing. Along with her return, Joan remitted a check for $275, which was the balance of the taxes she owed with her return. Disregarding interest, calculate the total penalties that Joan will be required to pay, assuming the failure to file was not fraudulent.$ c. Jack filed his tax return 4 months and 6 days late and did not request an extension of time for filing. Jack's return indicated that he is to receive a $9,695 refund in taxes. Calculate the amount of Jack's…
Mr A is a florist. He owns a delivery van which is primarily used for collecting supplies and making deliveries to customers. However, outside of regular business hours, Mr A uses the van for personal errands, such as shopping and driving his children to school. Throughout the Tax Period, Mr A recorded the mileage of his business and personal journeys. The mileage records revealed that journeys made for a business purpose accounted for 60% of the use of the van, while the remaining 40% of use related to Mr A’s personal use of the van. Mr A’s accounting income for the tax period is AED 4,500,000. Vehicle expenses were calculated to be AED 120,000. What is Mr A's tax liability?
John filed his individual income tax return 3½months after it was due. He had not requested an extension of time for filing. Along with his return, John remitted a check for $1,000, which was the balance of the taxes he owed with his return. Disregarding interest, calculate the total penalty that John will be required to pay, assuming the failure to file was not fraudulent (and that he is not subject to failure-to-pay penalties).
Hoang Nguyen, a resident taxpayer, had the following receipts and balances during the2018/19 tax year. Ignore GST.Receipts related to business as a plumber:Receipts from debtors $ 172,000Cash Sales 15,000Volume rebates from suppliers 3,000Insurance recovery for loss of income(Hoang spent 2 weeks in hospital following a work accident) 7,000Hoang also had the following balances relating to his business:Debtors as at 30 June 2018 19,000Debtors as at 30 June 2019 27,500Receipts related to rental property in Brisbane:Rent received from tenants during the year 12,000Water rates recovered from tenants 600Balances relating to rental property in Brisbane:Rent received in advance as at 30 June 2018 1,300Rent outstanding from tenants as at 30 June 2019 2,000Tenant’s bond held by Rental Bond Board 1,200Total deductions from business and rental property 132,000PAYG tax instalments paid by Hoang during the year 21,000Calculate Hoang’s taxable income for the 2018/19 tax year.
A taxpayer has a liabilty on their California return greater than $80,000. They cut a check to the State for $100,000 instead of using an E-Pay system. They regularly have large liabilities, and this is not a one-time representation of their income, like a windfall or lottery payment. What is the amount of the penalty that they will pay due to not using the mandatory E-Pay for this liability? in california ftb?
Vella owns and operates an illegal gambling establishment. In connection with this activity, he has the following expenses during the year: Rent Bribes Travel expenses Utilities Wages Payroll taxes Property insurance Illegal kickbacks $33,500 50,250 3,350 20,100 248,000 16,750 1,675 30,150 What are Vella's total deductible expenses for tax purposes?

SEE MORE QUESTIONS

Recommended textbooks for you

CONCEPTS IN FED.TAX., 2020-W/ACCESS

CONCEPTS IN FED.TAX., 2020-W/ACCESS

Accounting

ISBN:

9780357110362

Author:

Murphy

Publisher:

CENGAGE L

CONCEPTS IN FED.TAX., 2020-W/ACCESS

CONCEPTS IN FED.TAX., 2020-W/ACCESS

Accounting

ISBN:

9780357110362

Author:

Murphy

Publisher:

CENGAGE L

SEE MORE TEXTBOOKS