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Your client, Sam, is a small business taxpayer. He is under the impression that every dollar...

Your client, Sam, is a small business taxpayer. He is under the impression that every dollar he spends currently related to his business will reduce his taxable income. How would you explain the tax law related to the deductibility of expenses to Sam? Why are some expenses not deductible? Provide an example of an expense to support your response.

Provide an alternative example of where Sam might have an expense disallowance. Also, explain what actions Sam could take to turn a disallowed expense into a deductible expense.

PS: Please answer everything that is required

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Your client, Sam, is a small business taxpayer. He is under the impression that every dollar he spends currently related to his business will reduce his taxable income. How would you explain the tax law related to the deductibility of expenses to Sam? 26 U.S. Code 162- Trade or business expensessays There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.. Salary needs to be reasonable for any services done. Travel expenses (meal, and lodging),shouldnot be lavish or extravagant while on business away from home. Under Publication 535, Business Expenses of the IRS also says to be deductible; a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.Alsiness expenses should be held separate from personalexpense. Why are some expenses not deductible? Provide an example of an expense to support your response. You cannot deduct personal, living, or family expenses because they are not business related. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part. For Example, You have two vehicles, one for person use and the other for business.Expenses for your personal vehicle shouldntbe added to the business expense. It should separated.

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