Tax Exam 2 (Business income)

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  1. Gross income from services = ... 
    Gross income for businesses engaging in mining, merchandising, and manufacturing = ... - ...
    • total receipts
    • sales - COGS
  2. There is no exhaustive list of expenditures that qualify for a... for tax purposes.  Instead, an expenditure is only deductible if it... for deductibility and there is no...
    deduction, meets all of the criteria, law prohibiting deduction.
  3. 3 criteria for deductibility. (ONR)
    • 1. Ordinary
    • 2. Necessary
    • 3. Reasonable (Arms length transaction)
  4. No deduciton is allowed for expenditures contrary to... (illegal payments, bribes, kickbacks, fines, penalties, treble damages under antitrust laws)
    public policy
  5. Payments made to public officials are deductible if they constitute a... in that country.
    normal way of doing business
  6. Expenses related to an illegal activity are deductible as long as... income is reported and the illegal activity is not...
    income is reported, drug-related.
  7. ... and... may NOT be deducted unless related to legislation on the local level that... the TP’s business.  Local does not include... or... action.
    Politcal contributions, lobbying expenses,  directly affects, state, federal
  8. A business must... the cost of acquiring, constructing, or creating property with a... beyond the end of the tax year. This cost is recovered through..., ..., or...
    capitalize, useful life, depreciation, depletion, amortization
  9. Cost recovery may occur upon a...
    sale.
  10. The cost you recover id the amount of your...
    cost basis
  11. Taxpayers may not deduct any expense allocated or related to...
    tax-exempt income
  12. Insurance proceeds are... and... in GI.
    tax-exempt, not included
  13. Insurance premiums.... deductible
    are not
  14. Personal expenses... deductible unless...
    are not, authorized
  15. Employees may deduct education expenses if incurred to:
    a. ... or... skills required in current employment
    b. Meet... of employer or law
    But not if necessary to meet minimum requirements for entering a...
    • maintain, improve
    • express requirements
    • new profession
  16. Business meals have a component that is... in nature which is why TPs may deduct only... of a meal as a business expense.
    personal, 50%
  17. Entertainment costs can be deducted at..., but only if...

    1. Business associates are...
    2. The amount of entertainment paid is...
    3. The entertainment is... or... the business
    • 1. entertained
    • 2. reasonable
    • 3. directly related, associated with
  18. Country club membership fees... deductible
    are not
  19. With regards to transportation expenses,

    1. Direct costs incurred traveling between...
    2. Must determine business use percentage = ... / ...
    3. Standard Mileage amount -...
    4. Commuting miles... deductible
    • 1. business sites
    • 2. business miles / total miles
    • 3. 57.5 cents/mile
    • 4. are not
  20. Actual cost method for transportation expenses = (... / ...) x ...
    business miles, total miles, total costs
  21. With regards to travel, 

    1. Costs are deductible if...
    2. If all is business-related travel then costs... deductible (Meals at 50%)
    3. If part business and part personal then expenses are deducted based upon...
        a. Whether the trip was... business or personal
        b. What portion is... vs...
    • 1. away from home
    • 2. are
    • 3. primarily, business, personal
  22. Deductible travel requires... to be spread pro-rata based on... and... use.
    expenses, business, personal
  23. International travel requires a pro rata split if the trip is...

    1. Longer than... OR
    2. more than... % is for personal purposes
    • 1. 1 week
    • 2. 25%
  24. DPAD stands for...
    Domestic Production Activities Deduction
  25. With regards to DPAD,

    1. It is a... deduction provided by Congress to provide an... for U.S.
    2. You deduct... % of the lesser of
         a. ... before DPAD or
         b. QPAI
    • 1. fictitious, economic incentive
    • 2. 9, taxable income
  26. QPAI stands for...
    qualified production activities income.
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317676
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Tax Exam 2 (Business income)
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TAX
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