Chapter 7- Taxation

allowed

deduction for all ordinary and neccessary business expenses

not allowed

deduction for permanent improvements to increase the value of the property

capitalzied

cost of improvement

deductible

expenditures that are regular and recurring in nature and do not materially add to either the value or the useful life of an asset are deductibl

5 years and 15 years 

research and experimental expenditurescan be capitalized beteen 2021 and 2024 can be ammortized over 

advertising, soil and water conservation, fertilizers, intangible drilling costs

immediate deduction is allowed on these other examples and industrys

tax basis

unrecovered dollars represented by an asset

fair market value, cash, property, or services expended to acquire an asset, and sales tax, and service costs

cost of an aset

adjusted tax basis

initial basis reduced by depreciation, ammortiziation

leverage

use of borrowed finds to purchase assets and is included in basis

inventory, tangible assets, intangible assets

cost recovery methods

cost recovery

refers to when you will be able to expense the cost of an asset for tax purposes

lose value over time due to wear and tear, obsolescence

depreciation applies to tangible assets that

MACRS incentive

the shorter lives reduce the after tax cost of the assets and act as an incentive for firms to make capital acquisitions

200%

depreciation 3,5,7,10 computation method

150% declining

depreciation for 15 and 20 year recovery period computation

straight line

depreciation for 25, 27, 39, and 50 recovery period computation

40%

midquarter conversion applies if more than % is acquired in the fourth quarter

taxable business income

Deduction for section 179 is limited to

15 years

capitalized cost of most acquisition intagibles is ammortized over____