Chapter 4 - Self-Employment, Farming and Adjustments Flashcards
A sole proprietor generally reports all self-employment income and expense on what schedule?
Schedule C
Gross income includes what?
All income from a trade or business
A deduction from gross income is allowed for all _____ and _______ expenses paid or incurred during a tax year in carrying on a trade or business.
Ordinary and Necessary expenses
An activity that is not engaged in for a profit is _____?
A hobby
______ means the taxpayer devotes a substantial amount of business time to the activity.
Regular
Implies that the expense normally occurs or is likely to occur in connection with businesses similar to the one operated by the taxpayer claiming the deduction.
Ordinary
The expenditures to not need to occur frequently
Implies that an expenditure must be appropriate and helpful in developing or maintaining the trade or business
Necessary
Up to _____ of the cost of employee achievement awards is deductible by an employee for all non-qualified plan awards.
$400
Taxpayers can deduct up to ______ of start-up costs and _____ of organizational costs in the taxable year in which the business begins.
$5000
$5000
The cost of intangibles must generally be?
Capitalized
________ is allowed is allowed if the intangible has a determinable useful life.
Amortization
Replacing machinery is generally a?
Capital expenditure
______ _______ are made in acquiring or improving property that will have a useful life of longer than 1 year.
Capital expenditures
If the property is a depreciable asset, the cost is recovered through ________.
depreciation
If the property is not a depreciable asset, the amount of capital expenditure might be recovered when?
At the time of disposal
