文档介绍：Chapter 6
Deductions and Losses
Learning Objectives
Distinguish between deductions for and from AGI
Discuss the criteria for deducting business and investment
List the substantiation requirements for deducting travel and entertainment expenses
Explain the timing of deductions under both the cash and accrual methods
Learning Objectives
• Explain the Tax consequences of wash sales
• Tax consequences of transaction between related parties
• Discuss the criteria for determining whether an activity is a hobby or trade or business
• Determine the tax consequences of vacation homes.
For Versus From AGI Classification
For AGI
Reduces AGI which affects the allowable deduction for itemized deductions
mon deductions for AGI
Trade or business expenses
IRAs
Alimony
Losses on investment
Interest paid by certain individuals on qualified educational loans
1/2 of self-employment tax and 60 % of health insurance costs paid by self-employed individuals
For Versus From AGI Classification
From AGI
Itemized deduction only will have tax benefit if the total deductions exceed the applicable standard deduction
Criteria For Deducting Business And Investment Expenses
Related to a profit-motivated activity
Ordinary expenses
Necessary expenses
Reasonable expenses
Properly documented
An expense of the taxpayers(not someone else’s expense)
General Restrictions on the Deductibility of Expenses
Capitalization versus expense deduction
Expenses related to exempt e
Expenditures that are contrary to public policy
Other expenditures that are specifically disallowed
Proper Substantiation Requirement
The taxpayer has the burden of proof
The Cohan rule
More restrictive substantiation requirements for travel, entertainment, business gifts
When An Expense Is Deductible
Cash method
Deduct expenses when paid
Prepaid expenses which extend beyond the end of tax year must be amortized
Points paid in principal residence
Clearly disclosed
Secured by residence
When An Expense Is Deductible
Accrua