Introduction | Video

Video 1.1. Course Introduction

Congress seems to have intended for a business’s taxable income to reflect the net increase in wealth from a business. The result is that, according to IRC §162, businesses can deduct expenses incurred to generate business income. This is a relatively broad and ambiguous section of the Internal Revenue Code (IRC), which Congress and the Internal Revenue Service (IRS) supplement with specific statutory and regulatory rules authorizing deductions. The rules generally apply to all types of business entities, including sole proprietorships, partnerships, limited liability companies (LLCs), S corporations, and C corporations.

In this lesson, you will review the general rules for business expenses, as well as the types of expenditures that are not deductible. You will also jump into some specific tax issues with income and expenses.

Learning Objectives

After completing this lesson, you should be able to

• describe the requirements and limitations on business tax deductions,
• explain the permitted tax years,
• describe the permitted tax accounting methods and the effect on timing of recognition of income and expenses, and
• identify specifically permitted business tax deductions.

Lesson 1 Readings and Activities

By the end of this lesson, make sure you have completed the readings and activities found in the Lesson 1 Course Schedule.

 

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Reference

Trade or Business Expenses, 26 U.S.C. § 162 (2011).