Exam (elaborations)
TAX 4001 Assessment-Ch 7 (1)
- Course
- Institution
TAX 4001 Assessment-Ch 7 (1)
[Show more]
Seller
Follow
topgradesdr
Reviews received
Content preview
TAX 4001 Assessment-Ch 7LO 07-01: Decide if a business expenditure should be deducted or capitalized - ANS-LO
07-01: Decide if a business expenditure should be deducted or capitalized
financial cost of resources as part of revenue generating activities are reduced by -
ANS-any tax savings
tax savings are usually maximized if - ANS-deductible in the current year
PV of tax savings decreases if - ANS-firm must capitalize & postpone deduction
Capitalization - ANS-expenditure is recorded as an asset on balance sheet
if never allowed any tax deduction, then after tax cost = - ANS-before-tax cost
basic premise regarding expenditure deductions - ANS-no expenditure is deductible
unless authorized by IRC
IRC allows to deduct - ANS-all ord and necc exp paid or incurred during the tax year in
carrying on any trade or business
deduct routine operating expenses in - ANS-year incurred under firm's method of
accounting
IRC prohibits deductions for_____ but allows____ - ANS--permanent improvements or
betterments made to incr value of any property
-firms to recover some in form of future deductions
in cash flow terms, future deductions are _________ current deduction - ANS-worth
less than
firms minimize costs of operations by - ANS-deducting expenditures as soon as
possible
if the expenditure creates or enhances distinct asset w/ useful life substantially beyond
current year - ANS-expenditure must be capitalized
, if the expenditure DOES NOT create or enhance a specific asset, expenditure must be
capitalized if - ANS-it results in a significant long-term benefit to the firm
If tax treatment of an expenditure is uncertain, _____ is the norm, while ____ is the
exception - ANS-capitalization
deductibility
expenses related to raising capital or reorganizing a firm's capital structure _________
and therefore ________ deductible - ANS--benefit the firm for the duration of its
existence
-are not deductible
corporations (do or do not?) recognize gain on the receipt of cash in exchange for stock
- ANS-do not
repair and maintenance costs that are regular and recurring in nature and do not
materially add to either the value or the useful life of an asset are - ANS-deductible
Expenditures that substantially incr value of an asset or useful life of an asset are -
ANS-nondeductible capital improvements
the expense of adapting an asset to a new or different use must be - ANS-capitalized to
the cost of the asset
Per IRS, environmental cleanup costs should be - ANS-capitalized
September 2013 final regulation issued by IRS provided safe harbors permitting
deductibility of (3) - ANS-1) de minimis expenditures
2) routine maintenance
3) certain building improvements by qualifying small taxpayers
De Minimis Expenditures - ANS-deduction for expenses not exceeding a per-item
amount
building improvement deductions - ANS-may deduct cost of improvements, not to
exceed the lesser of (a) 10,000 or (b) 2% of the buildings unadjusted basis
preferential tax rules - ANS-special rules permitting firms to deduct expenditures that
are clearly capital in nature
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller topgradesdr. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
81989 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now