ACC250 Chapter 6 Flashcards
An employer’s reimbursement plan under which employees must submit documentation supporting expenses to receive reimbursement and reimbursements are limited to legitimate business expenses.
ACCOUNTING PLAN
A common planning strategy in which a taxpayer pays two year’s worth of itemized expenses in one year to exceed the standard deduction in that year.
BUNCHING ITEMIZED DEDUCTIONS
A profit-motivated activity that requires a relatively high level of involvement or effort from the taxpayer to generate income.
BUSINESS ACTIVITIES
Any asset that would have generated a long-term capital gain if the taxpayer had sold the property for its fair market value.
CAPITAL GAIN PROPERTY
A loss arising from a sudden, unexpected, or unusual event such as a fire, storm, shipwreck or loss from theft.
CASUALTY LOSS
Limitations that are maximum amounts for adjustments to taxable income (or credits). The amounts in excess of the ceiling are either lost or carried to another tax year.
CEILING
Traveling from a personal residence to the place of business.
COMMUTING
A fixed deduction allowed for each individual who qualifies as a “dependent” of the taxpayer.
DEPENDENCY EXEMPTION
A fixed income tax deduction a taxpayer may claim for each person who qualifies as a dependent of the taxpayer. This includes the taxpayer (and spouse on a joint return) who does not qualify as a dependent of another.
EXEMPTION
A minimum amount that an expenditure (or credit or other adjustment to taxable income) must meet before any amount is allowed.
FLOOR LIMITATION
A revenue-generating activity that is motivated by personal motives rather than profit objectives.
HOBBY
A profit-seeking activity that is intermittent or occasional in frequency including the production or collection of income or the management, conservation, or maintenance of property held for the production of income.
INVESTMENT ACTIVITIES
Deductions representing the sum of certain itemized deductions, such as reimbursed employee business expenses, investment expenses, and tax preparation fees, that are subject to a special floor limitation.
MISCELLANEOUS ITEMIZED DEDUCTIONS
Interpreted as an expense that is normal or appropriate and that is helpful or conducive to the business activity.
ORDINARY AND NECESSARY
Property that if sold would generate income taxed at ordinary rates.
ORDINARY INCOME PROPERTY