ACCT 421 Lecture Notes - Lecture 8: Adjusted Basis, Gross Income, Advance Payment

• School: Old Dominion University
• Department: Accounting
• Course: ACCT 421
• Professor: Vivian Paige

Document Summary

Chapter 9: business income, deductions, and accounting methods. Same as individual income- 61 (a)- (cid:862)all i(cid:374)(cid:272)o(cid:373)e fro(cid:373) (cid:449)hate(cid:448)er sour(cid:272)e deri(cid:448)ed(cid:863) Gross income does not include return of capital. What constitutes a trade or business: definition depends on facts and circumstances, profit motive. Ordinary, necessary and reasonable: ordinary: common and accepted practice in a particular field, necessary: helpful and appropriate in carrying on trade or business, reasonable: cannot be extravagant. Cannot deduct: expenditures against public policy. Illegal activities: political contributions and lobbying costs, capital expenditures, expense associated with production of tax-exempt income, personal expenses. May be able to deduct (records required: property use, meals and entertainment, travel and transportation. Generally only 50% deductible: must (cid:271)e (cid:862)dire(cid:272)tly related(cid:863) or (cid:862)asso(cid:272)iated (cid:449)ith: the a(cid:272)ti(cid:448)e (cid:272)o(cid:374)du(cid:272)t of a trade or business, cannot be lavish or extravagant. Business meals: taxpayer or employee must be present. Entertainment: can only entertain business associates.