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Essay / Research Paper Abstract
This 3-page paper discusses whether a particular expense can be deducted, based on Section 162 of the U.S. Tax Code. Bibliography lists 3 sources.
Page Count:
3 pages (~225 words per page)
File: AS43_MTlawdeduc.rtf
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Unformatted sample text from the term paper:
this case, Joe gave the money to the client due to a malpractice claim. It appears as though the client received erroneous tax advice from Joe. But Joe knows that
if the claim is filed, his insurance will likely be cancelled or, at the least, his premiums will be increased substantially. Joe is fairly certain he can deduct the $75,000
- but to determine Joes situation, well take a look at Section 162. According to the IRS, Sections 162 and 162-1(a) of
the Income Tax Regulations allow, for the most part, all "ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business" (Section 162,
2009). It could possibly be argued that the $75,000 paid out to the client is an "ordinary and necessary expense" (though if it is, Joe isnt a very good CPA
and his clients would be advised to find other help). In all seriousness, though, how does one consider if a tax treatment is a "necessary" expenditure? The Tax Regulation points
out that in making this decision, what should be considered is the extent to which the expense will produce some kind of future benefit (Section 163, 2009). It could be
assumed, to an extent that in Joes case, paying out the $75,000 would provide some kind of future benefit. If the client didnt come back, at least he wouldnt bad-mouth
Joe to others, thereby ruining the CPAs reputation. Some years ago, Waxler Towing Company, a marine towing service, felt the same way
as Joe did. When one of its barges was damaged, the company opted not to file a claim under insurance, but to pay for repairs for the barge and deduct
...