General Business Income and Expenses Flashcards
On what form does a C Corp report its income and expenses?
Form 1120
On what form does an S Corp report its income and expenses?
Form 1120-S
What makes an expense ORDINARY?
It is common and accepted in the taxpayer’s industry.
What makes an Expense NECESSARY?
It is helpful and appropriate for the taxpayer’s trade or business.
Ordinary and Necessary expenses can be differentiated from what other expenses?
(1) Capital Expense
(2) COGS
(3) Personal
Two types of plans for reimbursing employees for business expenses?
Accountable and Nonaccountable plans
Tax treatment of accountable plan for employee reimbursement?
Can be deducted in category of expense paid.
Tax treatment of nonaccountable plan for employee reimbursement?
Must be deducted as W-2 wage
How to make employee reimbursement plan accountable?
Employee must submit expense reimbursement request.
COGS Formula?
Beginning Inventory
+Purchases
+Cost of Labor
+Uniform Capitalization Costs
+Other Costs
-Ending Inventory
=COGS
T/F Factory overhead is included in COGS?
True
Do FREIGHT COSTS for purchased products/raw materials get capitalized?
Yes
What indirect costs are capitalized under UNICAP?
(1) Rent
(2) Interest
(3) Storage
(4) Purchasing
(5) Processing
(6) Repackaging
(7) Handling
(8) Admin Costs
When can cash basis taxpayer deduct all of prepaid rent (Also Insurance Premiums)? (Not interest?)
If benefit doesn’t extend beyond 12 months, cash basis taxpayer can deduct at once; otherwise must deduct over period of benefit.
Under what circumstances are business meals deductible?
When the meals are provided to a business associate or when they are incurred while traveling.
