Answered: Describe what the IRS means by “both… | bartleby

SWFT Comprehensive Vol 2020

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter5: Gross Income: Exclusions

Section: Chapter Questions

Problem 44P

See similar textbooks

Related questions

Question

Describe what the IRS means by “both ordinary and necessary.”

Tax code 280e was created in 1982 after Jeffrey Edmondson, a Minneapolis-based
man who dealt amphetamines, cocaine, and marijuana, won a lawsuit against the
IRS to claim business expenses.
During the taxable year of 1974, Edmondson received 1.1 million amphetamine
pills, 100 pounds of marijuana, and 13 ounces of cocaine from a supplier on
consignment. Edmondson reported on his 1974 return that his cost of goods sold
for these products was $105,300, itemizing deductions, which included a couple
thousand miles he put on his automobile, the cost of a scale to weigh his product,
packaging costs, a couple hundred dollars in long-distance and local business calls
and a portion of his rent for his home office.
The court decided that he was entitled to "both ordinary and necessary" business
expenses in 1981. The next year, however, Congress passed tax code 280e,
banning businesses that trafficked Schedule I or Schedule II substances from
taking business expenses besides the cost of goods sold.

Expert Solution

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Blurred answer

Similar questions

Last year Acme paid Ralph $15,000 to install a new air-conditioning unit at its headquarters building. The air conditioner did not function properly, and this year Acme requested that Ralph return the payment. Because Ralph could not repair one critical part in the unit, he refunded the cost of the repair, $5,000, to Acme. A> Is Ralph required to include the $15,000 payment he received last year in his gross income from last year? B> What are the tax implications of the repayment if Ralph was in the 35 per cent tax bracket when he received the $15,000 payment from Acme, but was in the 28 per cent tax bracket when he refunded $5,000 to Acme? C> How would you answer the question in part (b) if Ralph refunded $2,500 to Acme and not $5,000?
For an accrual basis taxpayer, the all events test is not met until economic performance occurs. Economic performance occurs: (a.) When a corporation receives its completed tax return from its accountant (b.) When the employees of self-insured corporation receive medical treatment (c.) When a corporation purchases a $5 million annuity in settlement of $20 million award to a plaintiff/customer in a production liability lawsuit (d.) On March 1, when a corporation uses a leased copy machine to make 12,000 copies for the month of March and it must pay $.10 per copy for copies mad in excess 10,000 plus a flat fee of $500/month.
36 ZZZ is engaged in a VAT-business and a non-VAT business. Her records show the following data, no tax included, for the taxable year: Sales From VAT business P 6,000,000 From non-VAT business 4,000,000 Purchases of goods For VAT business from VAT suppliers 3,000,000 For non-VAT business 2,000,000 Purchases from VAT suppliers of supplies used for VAT and non-VAT Business 30,000 Expenses incurred for both VAT and non-VAT business (70% of these expenses were paid to VAT-registered enterprises) 100,000 The VAT payable is:
Jaime is a non-VAT seller of goods. Since he has no official receipts or invoices to support his expenses, he opted for the Optional Standard Deduction (OSD). When he filed his income tax return, he intentionally applied the rate of 20% on his gross sales. In this case, Jaime applied this type of scheme: Capitalization Shifting Evasion Avoidance 1st statement – The Legislative Department levies the taxes. 2nd statement – The Executive Department, through the Department of Finance’s line agency, the Bureau of Internal Revenue makes the assessment and collection of internal revenue taxes. Only the 1st statement is true Only the 2nd statement is true Both statements are true Both statements are false
One of the initiatives of the Federal government in recent years was to increase the taxation paid by high income earners, while at the same time, not instituting any “tax hikes”. One way this was accomplished was to reduce the basic personal tax credit for individuals with income greater than $151,978 up to an income level of $216,511. In the following situation, you the taxpayer have an income level of $200,709. calculate and present your reduced non-refundable personal tax credit amount below.
May Yaman is engaged in a VAT-business and a non-VAT business. Her records show the following data, no tax included, for the taxable year: Sales From VAT business P6,000,000 From non-VAT business 4,000,000 Purchases For VAT business from VAT suppliers 3,000,000 For non-VAT business 2,000,000 Purchases from VAT suppliers of supplies used for VAT and non-VAT business 30,000 Expenses incurred for both VAT and non-VAT business (70% of these expenses were paid to VAT-registered enterprises) 100,000 The VAT payable is: Group of answer choices
In 1975, a trial was held to settle a tax dispute between the owners of the Atlanta Falcons, a National Football League franchise, and the Internal Revenue Service. In 1966, the owners had paid $8.5 million to purchase the franchise. They considered $50,000 to be the cost of the franchise (which is not depreciable for income tax reporting), $727,000 was deferred interest, and the remaining $7.7 million was claimed to be the cost of the players’ contracts and options. The dispute centered on several variables: • How much of the purchase price was assign-able to television rights? • Can the value assignable to television rights be amortized? If so, what is the expected life? • How much of the purchase price was assign-able to player contracts and options? • Over what life should the value assigned to the players be amortized? • What is the value of the franchise? As an independent accountant, explain the approach you would take and the information you would need to provide advice to the…
A taxpayer operating a small business applied for and received the Main Street Small Business Tax Credit from the CDTFA. During the year, they increased their net employee count for full-time equivalent (FTE) employees to 102 over their average monthly FTE values. What is the amount of the credit that they can claim on their return for this massive employee increase? (Do not consider how much can be used, only how much they are eligible for given the circumstances. None of the employee wages are used in the consideration of any other credits.
Juan inquired from the BIR whether or not he will be covered with the new tax law. The BIR issued an administrative ruling that his activities are not covered by the new tax law. As a result, Juan did not pay his tax for several years based on the said BIR ruling. Currently, the BIR Commissioner found out that the previous ruling was erroneous and reversed the same with a new BIR ruling. The BIR then issued tax assessment against Juan for purposes of collecting back taxes.Is the tax assessment against Juan correct? A. Yes, because the previous BIR ruling was corrected and the activities of Juan should have been taxable. B. Yes, because the ruling of the BIR Commissioner must be final. C. No, Juan should be exempted from paying taxes under the old and new law. D. No, because reversal of BIR ruling shall not be retroactive in application especially if the ruling is prejudicial to the taxpayer
A taxpayer has a liabilty on their California return greater than $80,000. They cut a check to the State for $100,000 instead of using an E-Pay system. They regularly have large liabilities, and this is not a one-time representation of their income, like a windfall or lottery payment. What is the amount of the penalty that they will pay due to not using the mandatory E-Pay for this liability? in california ftb?

Recommended textbooks for you

SWFT Comprehensive Vol 2020

SWFT Comprehensive Vol 2020

Accounting

ISBN:

9780357391723

Author:

Maloney

Publisher:

Cengage

SWFT Essntl Tax Individ/Bus Entities 2020

SWFT Essntl Tax Individ/Bus Entities 2020

Accounting

ISBN:

9780357391266

Author:

Nellen

Publisher:

Cengage

CONCEPTS IN FED.TAX., 2020-W/ACCESS

CONCEPTS IN FED.TAX., 2020-W/ACCESS

Accounting

ISBN:

9780357110362

Author:

Murphy

Publisher:

CENGAGE L

SWFT Comprehensive Vol 2020

SWFT Comprehensive Vol 2020

Accounting

ISBN:

9780357391723

Author:

Maloney

Publisher:

Cengage

SWFT Essntl Tax Individ/Bus Entities 2020

SWFT Essntl Tax Individ/Bus Entities 2020

Accounting

ISBN:

9780357391266

Author:

Nellen

Publisher:

Cengage

CONCEPTS IN FED.TAX., 2020-W/ACCESS

CONCEPTS IN FED.TAX., 2020-W/ACCESS

Accounting

ISBN:

9780357110362

Author:

Murphy

Publisher:

CENGAGE L

SWFT Individual Income Taxes

SWFT Individual Income Taxes

Accounting

ISBN:

9780357391365

Author:

YOUNG

Publisher:

Cengage

SWFT Comprehensive Volume 2019

SWFT Comprehensive Volume 2019

Accounting

ISBN:

9780357233306

Author:

Maloney

Publisher:

Cengage

PAYROLL ACCT., 2019 ED.(LL)-TEXT

PAYROLL ACCT., 2019 ED.(LL)-TEXT

Accounting

ISBN:

9781337619783

Author:

BIEG

Publisher:

CENGAGE L

SEE MORE TEXTBOOKS