Flashcards in Chap 1 Business Income, Deductions, and Accounting Methods Deck (50)
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
IRC 162 generally includes expenses incurred in the pursuit of what?
ordinary for tax purposes means what?
Normal or appropriate for the business under the circumstrances
necessary for tax purposes means what?
helpful or conducive to the business activity
besides being ordinary and necessary , for expenses to be deducted they need to be what?
reasonable in amount
the determination of ordinary and necessary as well as reasonable for deductions is determined on a case by case basis
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
TCJA requires govt aqgencies to report payments received for fines and penalties if the payment is over what?
meal deductions for business is limited to what percentage of expense?
the business interest expense deduction is limited to what?
business interest income + 30% times the adjusted taxable income
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
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.)
once income and expenses are known, accounting methods match income and expenses to a specific what?
what kind of accounting is slow to recognize income but quick to recognizze losses or expenses?
what kind of accounting is quick to recognize income but likely to defer deductions?
the objective of congress with tax accounting is to what?
maximize tax revenue
the objective of GAAP financial accounting is to what?
avoid misleading investors and creditors
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
a propretorships accounting period is when?
same as proprietor (end of year)
a C corporation can have what accounting period?
calendar, fiscal, or 52/53 week year
a C corp chooses which accounting periods by filing an initial tax return?
calendar or fiscal
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
a flow thru entity has what accounting period?
match to owners period (multiple owners can make it complicated)
the overall method of cash recognizes income when?
when it is recieved
the overall method of accrual recognizes income when?
when earned or recieved ( whichever is first generally)
large corporations with gross receipts over 26M for 2019 must use what overall method for recognizing income?
what is a hybrid method of recognizing income?
mix of accrual and cash depending on accounts
what are the 3 permissible overall method for recognizing income?
the overall method of recognizing income is adopted when?
when you file first tax return