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Law Outlines Federal Income Tax (Duke Zelenak) Outlines

Business Expense Deductions Outline

Updated Business Expense Deductions Notes

Federal Income Tax (Duke Zelenak) Outlines

Federal Income Tax (Duke Zelenak)

Approximately 51 pages

Federal Income Taxation outline for Professor Zelenak from Duke Law...

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Business Expense Deductions

  1. Section 162: deductions shall be allowed for all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.

    1. Ordinary: Ordinary means something that is normal, usual, or customary in the trade or business in which the taxpayer is engaged. DuPont.

    2. Necessary: in Welch v. Helvering, the Supreme Court describe the word necessary in section 162 as requiring only that expenses be appropriate and helpful in the development of the taxpayerโ€™s business.

      1. A taxpayer can generally deduct the amount he pays his employees for the services they perform.

  2. Public policy limitations p533

    1. Cannot deduct fines for breaking the law

      1. Section 162(f) denies deduction of fines or similar penalties paid to a government for a violation of law.

      2. Section 162(c)(1) prohibits deduction of illegal bribes/kickbacks to officials

      3. Section 162(c)(2) prohibits deduction of payments to any other persons if the payment constitutes an illegal bribe or kickback. But if the payment violates only the state law, if will be nondeductible only if that law is generally enforced.

      4. Section 162(c)(3) denies deductions for kickbacks, rebates, and bribes with Medicare and Medicaid programs.

    2. Ordinary and necessary expenses attributable to its provision of medical marijuana pursuant to the California Compassionate Use Act of 1996 are deductible. (Californians helping to alleviate medical problems)

    3. tax people on MORE than economic net income to penalize economic activity reverse tax expenditure

      1. 162(e)

      2. 162(f)

      3. 280(E)

  3. Lobbying expenses

    1. Lobbying expenses are not deductible. Section 162(e). Disallowance is necessary to make sure that the Treasury does not finance business lobbying with tax dollars, and the disallowance is necessary to put all taxpayers on the same footing with respect to lobbying.

  4. Travel p558

    1. Section(a)(2) allows deduction of travelling expenses (including amounts expended for meals and lodging...) while away from home in pursuit of a trade or business

    2. The taxpayer must be away from his tax home in order to qualify for these deductions (away from the general vicinity of his work place) and the taxpayer must satisfy the overnight rule (travel must...

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