Chap 1 Business Income, Deductions, and Accounting Methods Flashcards Preview

Corporate Tax > Chap 1 Business Income, Deductions, and Accounting Methods > Flashcards

Flashcards in Chap 1 Business Income, Deductions, and Accounting Methods Deck (50)
Loading flashcards...
1

IRC-162 says that there shall be allowed as a deduction all of what?

ordinary and necesarry expenses paid or incurred during the taxable year in carrying on any trade or business

2

IRC 162 generally includes expenses incurred in the pursuit of what?

profits

3

ordinary for tax purposes means what?

Normal or appropriate for the business under the circumstrances

4

necessary for tax purposes means what?

helpful or conducive to the business activity

5

besides being ordinary and necessary , for expenses to be deducted they need to be what?

reasonable in amount

6

T/F
the determination of ordinary and necessary as well as reasonable for deductions is determined on a case by case basis

T

7

What are 6 limits on business deductions?

1. expenses against public policy - fines, penalties, bribes, kickbacks
2. political contributions and lobbying costs
3. capital expenditures
4. expenses incurr3ed in the production of tax exempt income
5. personal expenses
6. mixed motive expenditures

8

TCJA requires govt aqgencies to report payments received for fines and penalties if the payment is over what?

600

9

meal deductions for business is limited to what percentage of expense?

50%

10

the business interest expense deduction is limited to what?

business interest income + 30% times the adjusted taxable income

11

adjusted taxable income for figuring out the business interest expense deduction limitiation is defined as what?

taxable income allocable to the business computed without regard to interest income, interest expense, depreciatyion, amortization, depletion, and NOL carryovers. Depreciation, amortization and depletion part only through 2021

12

business interest deduction limitation doesnt apply to who? (4)

1. real property trade when they elect out
2. farm business when they elect out
3. regulated utilitities (interplays with bonus depreciation)
4. small businesses (under 26M gross receipts for prio 3 taxable years.)

13

once income and expenses are known, accounting methods match income and expenses to a specific what?

period

14

what kind of accounting is slow to recognize income but quick to recognizze losses or expenses?

financial accounting

15

what kind of accounting is quick to recognize income but likely to defer deductions?

tax accounting

16

the objective of congress with tax accounting is to what?

maximize tax revenue

17

the objective of GAAP financial accounting is to what?

avoid misleading investors and creditors

18

what are the three accounting periods for tax allowed?

1. calendar year end (12/31)
2. fiscal year with last day of a month not december
3. fiscal year that is 52/53 week year end which is same day of a specific month

19

a propretorships accounting period is when?

same as proprietor (end of year)

20

a C corporation can have what accounting period?

calendar, fiscal, or 52/53 week year

21

a C corp chooses which accounting periods by filing an initial tax return?

calendar or fiscal

22

when a C corp chooses a 52/53 week year accounting period, what do they have to do for it to be in effect?

make a separate election . they can't just file a return

23

a flow thru entity has what accounting period?

match to owners period (multiple owners can make it complicated)

24

the overall method of cash recognizes income when?

when it is recieved

25

the overall method of accrual recognizes income when?

when earned or recieved ( whichever is first generally)

26

large corporations with gross receipts over 26M for 2019 must use what overall method for recognizing income?

accrual

27

what is a hybrid method of recognizing income?

mix of accrual and cash depending on accounts

28

what are the 3 permissible overall method for recognizing income?

1. cash
2. accrual
3. hybrid

29

the overall method of recognizing income is adopted when?

when you file first tax return

30

the cash method generally recognizes revenue when _____ and deductions when ____

received
paid