Taxpayer 1 and Taxpayer 2 are qualified surveyors running separate businesses in a small town. They provide services to the public, but they have both found that, in the past couple of years, the town is not big enough to support two full-time surveyors.
Taxpayer 1 offered Taxpayer 2 a lump sum of $150,000 plus $10,000 for each of the next three years on condition that Taxpayer 2 ceases his business and leave town for at least three years.
Taxpayer 2 agreed to Taxpayer 1's offer and Taxpayer 1 paid the relevant amounts.
Based on these facts, which of the following statements would be most correct in relation to Taxpayer 1's ability to claim tax deductions for the payments to Taxpayer 2 under s 8-1?
Select one:
a. The payments were necessarily incurred in the course of carrying on Taxpayer 1's business and should be deductible.
b. The payments were incurred to expand Taxpayer 1.s business and earn more assessable income and should be tax deductible.
c. The payments seek to establish or expand Taxpayer 1's business entity and are therefore capital in nature and not deductible.
d. The payments secure a temporary advantage no different from the paying of an annual premium for insurance on a motor vehicle.
C.The payments seek to establish or expand Taxpayer 1's business entity and are therefore capital in nature and not deductible. - Is the correct answer.
EXPLANATION ~ Capital expenditure is the money spent on acquisition or creation of assets.And it's the case of capital expenditure and there's no deduction available for the same.
(please up vote, if it was a help, please do!!)
Taxpayer 1 and Taxpayer 2 are qualified surveyors running separate businesses in a small town. They...
1. In 2018 Michael has $90,000 in salary from his full-time job and net self-employment income of $40,000 from his sole proprietorship. What is his self-employment tax? How much of it can he deduct in arriving at his AGI? Show and label calculations. 2. There are many differences between financial accounting income and tax income and deductions. Which of the following is an example of a timing (temporary) difference? Business meals are 50% deductible for tax purposes. Municipal bond interest...
Problem 1 (20 points total) Whirlwind Cycles is owned 100% by Daniel, a single taxpayer. Both Whirlwind Cycles and Daniel use the cash method of accounting for tax purposes. Whirl Cycles is organized as a C Corporation and the corporation pays all of its after-tax cash flows to Daniel as a dividend. The business incurred the following items of income and expense in Year 2: $225,000 3,000 Cash Sales Interest received from City of Flint Bonds (this is a municipal...
Required information Comprehensive Problem 4-56 (LO 4-1, LO 4-2, LO 4-3) [The following information applies to the questions displayed below.] Demarco and Janine Jackson have been married for 20 years and have four children who qualify as their dependents (Damarcus, Janine Jr., Michael, and Candice). The couple received salary income of $100,000 and qualified business income of $10,000 from an investment in a partnership, and they sold their home this year. They initially purchased the home three years ago for...
Current Attempt in ProgressOn December 31, 2019, Monty Inc. has taxable temporary differences of $2.19 million and a deferred tax liability of $613,200. These temporary differences are due to Monty having claimed CCA in excess of book depreciation in prior years. Monty’s year end is December 31. At the end of December 2020, Monty’s substantively enacted tax rate for 2020 and future years was changed to 30%.For the year ended December 31, 2020, Monty’s accounting loss before tax was $493,500. The following data are also available.1.Pension expense was...
What is the amount for qualified business deduction I tried $0,
$4000.00 and $$3,250
Required information [The following information applies to the questions displayed below.] John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2019, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part-time as a receptionist for a law firm earning a salary of $29,000. John also does some Web design work...
On December 31, 2019, Monty Inc. has taxable temporary differences of $2.19 million and a deferred tax liability of $613,200. These temporary differences are due to Monty having claimed CCA in excess of book depreciation in prior years. Monty’s year end is December 31. At the end of December 2020, Monty’s substantively enacted tax rate for 2020 and future years was changed to 30%.For the year ended December 31, 2020, Monty’s accounting loss before tax was $493,500. The following data are also available.1.Pension expense was $88,000 while pension plan...
[20] Bob, a calendar-year, cash-basis taxpayer, owns an insurance agency. Bob has four people selling insurance for him. The salesmen incur ordinary and necessary meal and entertainment expenses for which Bob reimburses them monthly. During the current year, Bob reimbursed his agents $10,000 for meals and $26,000 for entertainment. How much of the reimbursement can Bob deduct for meal and entertainment expenses on his current-year federal income tax return? A. $5,000 B. $8,000 C. $30,800 D. $36,000 [21] In January...
ASAP thx
ESSAY. Write your answer in the space provided or on a separate sheet of paper. 6) The following information is available for Bob and Brenda Horton, a married couple filing a joint return, for 2018. Both Bob and Brenda are age 32 and have no dependents. Salaries Interest income Deductible IRA contributions $200,000 12.000 Itemized deductions 11,000 25,600 Withholding 31,000 What is the amount of their gross income b. What is the amount of their adiusted gross income...
I. TRUE OR FALSE (20 POINTS) 1. Partnerships may adopt any fiscal tax year if the tax year is used consistently. 2. The IRS will automatically grant a request for a change in tax years, provided the proper form is filed in a timely manner. 3. "Annualizing" is a method by which the taxpayer can usually decrease the amount of tax he or she pays. 4. Generally, cash basis taxpayers must account for payments of prepaid interest using the accrual...
pls asap!ty
ESSAY. Write your answer in the space provided or on a separate sheet of paper. 6) The following information is available for Bob and Brenda Horton, a married couple filing a joint return, for 2018. Both Bob and Brenda are age 32 and have no dependents. Salaries Interest income Deductible IRA contributions $200,000 12.000 Itemized deductions 11,000 25,600 Withholding 31,000 What is the amount of their gross income b. What is the amount of their adiusted gross income...