Answer to Question #163291 in Accounting for newton

Question

Prepare a list of twelve (12) deductions shown on the return that you want to audit. For each of these deductions that you list, provide a one or two sentences for each explaining why you have identified the deduction. In other words, explain why you feel there is a possibility the deduction may be improper/non-deductible, excessive/not reasonable, etc.

Answer 1

Solution:

1.     Political contributions – These are non-deductible since they involve political campaigns.

2.     Charitable contributions – These are deductible when the charity organization is qualified under the tax law.

3.     Depreciation and amortization – These are deductible since they affect the normal business operations.

4.     Education expenses – These are non-deductible since they are used to further employee’s education.

5.     Lobbying expenses -  These are non-deductible since they are used for political campaigns and are not business expenses.

6.     Taxes – These are deductible expenses as they are incurred in business operations to reduce profits.

7.     Advertising expenses – These are deductible since they are used for normal business operations.

8.     Employee wages – These are deductible since they are used for business operations.

9.     Rent – These are deductible since they affect business operations.

10. Government fines and penalties – These are non-deductible since you are not allowed to deduct money issued to the government as fines and penalties.

11. Legal fees to acquire business assets – These are non-deductible since they are capital asset costs.

12. MV fuel – These are deductible as long as they are used to perform business operations.