REnumbered all pub 334 chapters

_pages/p17.chapter.9.md → _pages/p17.chapter.09.md

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 # Chapter 9: Basis of Assets

_pages/p17.chapter.10.md

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+---
+layout: post
+title: p17.chapter.10.pdf
+--- 
+
+# Chapter 10: Depreciation
+
+## Introduction
+- Discusses how to calculate the depreciation deduction for property used in a trade or business, including different methods and special rules.
+
+## What Property Can Be Depreciated?
+1. **Depreciable Property:**
+   - **Definition:** Property used in a trade or business or held for the production of income that has a determinable useful life of more than one year.
+2. **Types of Depreciable Property:**
+   - **Tangible Property:** Includes buildings, machinery, vehicles, furniture, and equipment.
+   - **Intangible Property:** Includes patents, copyrights, and computer software.
+3. **Non-Depreciable Property:**
+   - **Examples:** Land, inventories, and property placed in service and disposed of in the same year.
+
+## When Does Depreciation Begin and End?
+1. **Placed in Service:**
+   - Depreciation begins when the property is placed in service, i.e., when it is ready and available for a specific use.
+2. **Depreciation Ends:**
+   - Depreciation ends when you have fully recovered your cost or other basis or when you retire the property from service, whichever comes first.
+
+## Modified Accelerated Cost Recovery System (MACRS)
+1. **Definition:** The system used to depreciate most business and investment property placed in service after 1986.
+2. **MACRS Methods:**
+   - **General Depreciation System (GDS):** The most commonly used MACRS method, providing a faster write-off of the property.
+   - **Alternative Depreciation System (ADS):** A slower method that must be used for certain property.
+3. **Property Classes:**
+   - **3-year, 5-year, 7-year, 10-year, 15-year, 20-year:** Based on the type of property and how it is used.
+4. **Depreciation Conventions:**
+   - **Half-Year Convention:** Assumes property is placed in service in the middle of the year.
+   - **Mid-Quarter Convention:** Applies if more than 40% of the property is placed in service in the last quarter of the year.
+   - **Mid-Month Convention:** Applies to real property, assuming it is placed in service in the middle of the month.
+
+## Section 179 Deduction
+1. **Overview:**
+   - Allows businesses to deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year.
+2. **Limits:**
+   - **Dollar Limit:** The maximum amount you can deduct is subject to an annual limit, adjusted for inflation.
+   - **Investment Limit:** If the total cost of qualifying property exceeds a certain amount, the Section 179 deduction is reduced dollar for dollar.
+3. **Qualifying Property:**
+   - **Tangible Personal Property:** Includes machinery, equipment, and vehicles used in a trade or business.
+   - **Off-the-Shelf Software:** Software that is readily available for purchase by the general public.
+
+## Special Depreciation Allowance (Bonus Depreciation)
+1. **Definition:** An additional first-year deduction allowed for the cost of new or used qualified property.
+2. **Percentage:** Varies by tax year, typically allowing a significant portion of the property cost to be written off in the first year.
+3. **Qualified Property:** Includes most tangible depreciable property with a recovery period of 20 years or less.
+
+## Listed Property
+1. **Definition:** Includes assets that can be used for both business and personal purposes, such as cars, computers, and cameras.
+2. **Special Rules:**
+   - **Business Use Requirement:** Must be used more than 50% for business to qualify for accelerated depreciation and Section 179.
+   - **Recordkeeping Requirements:** Detailed records must be kept to substantiate the business use of listed property.
+
+## Amortization of Intangible Property
+1. **Definition:** Deducting the cost of certain intangible property over a fixed period.
+2. **Types of Amortizable Intangibles:**
+   - **Goodwill:** Deductible over 15 years.
+   - **Patents and Copyrights:** Deductible over the useful life of the property.
+3. **Amortization Method:** Typically straight-line over the useful life of the intangible property.
+
+## Depreciation Recapture
+1. **Definition:** When depreciable property is sold at a gain, part or all of the gain may be taxed as ordinary income, up to the amount of depreciation previously claimed.
+2. **Section 1245 Property:** Applies to tangible personal property, such as equipment and vehicles.
+3. **Section 1250 Property:** Applies to depreciable real property, such as buildings, but only for depreciation in excess of straight-line depreciation.
+
+---
+
+# Chapter 10 Quiz Questions
+
+1. **What is the Modified Accelerated Cost Recovery System (MACRS)?**
+   - **Answer:** MACRS is the system used to depreciate most business and investment property placed in service after 1986, with methods like GDS and ADS.
+
+2. **What is the Section 179 deduction?**
+   - **Answer:** The Section 179 deduction allows businesses to deduct the full purchase price of qualifying equipment and software up to an annual limit.
+
+3. **When does depreciation recapture occur?**
+   - **Answer:** Depreciation recapture occurs when depreciable property is sold at a gain, and part or all of the gain may be taxed as ordinary income up to the amount of depreciation previously claimed.

_pages/p17.chapter.11.md

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+---
+layout: post
+title: p17.chapter.11.pdf
+--- 
+
+# Chapter 11: Deducting Business Expenses
+
+## Introduction
+- Explains the rules for deducting business expenses, including what qualifies as a deductible expense and the limitations on certain deductions.
+
+## What Can I Deduct?
+1. **Ordinary and Necessary Expenses:**
+   - **Ordinary Expenses:** Common and accepted in your trade or business.
+   - **Necessary Expenses:** Helpful and appropriate for your business, though not necessarily indispensable.
+2. **Examples of Deductible Expenses:**
+   - **Rent:** Deduct rent paid for property used in your trade or business.
+   - **Interest:** Deduct interest on business loans.
+   - **Taxes:** Deduct state, local, and foreign taxes directly related to your business.
+   - **Insurance:** Deduct premiums for business insurance, including liability, malpractice, and workers' compensation insurance.
+   - **Salaries and Wages:** Deduct compensation paid to employees.
+   - **Employee Benefits:** Deduct the cost of employee benefit programs, such as health insurance, retirement plans, and education assistance.
+
+## Limits on Deductions
+1. **Travel, Meals, and Entertainment:**
+   - **Travel Expenses:** Deductible if they are ordinary and necessary for your business, including transportation, lodging, and meals.
+   - **Meals:** Generally, only 50% of the cost of meals is deductible.
+   - **Entertainment Expenses:** Generally, no longer deductible under current tax law.
+2. **Home Office Deduction:**
+   - **Eligibility:** To qualify, part of your home must be used regularly and exclusively for business.
+   - **Simplified Method:** Allows a standard deduction of $5 per square foot, up to 300 square feet.
+3. **Capital Expenses:**
+   - **Definition:** Costs of buying, improving, or restoring business property.
+   - **Depreciation:** Capital expenses are generally deducted over time through depreciation.
+4. **Business Start-Up Costs:**
+   - **Definition:** Costs incurred before the business begins operation.
+   - **Deduction Limit:** You can deduct up to $5,000 in start-up costs, with the remainder amortized over 15 years.
+
+## Nondeductible Expenses
+1. **Personal, Living, or Family Expenses:** These are not deductible as business expenses.
+2. **Fines and Penalties:** Generally not deductible, including penalties for violating the law.
+3. **Political Contributions:** Contributions to political campaigns or lobbying expenses are not deductible.
+4. **Club Dues and Membership Fees:** Dues for membership in clubs organized for business, pleasure, recreation, or other social purposes are not deductible.
+
+## Recordkeeping
+1. **Importance of Recordkeeping:** Good records are necessary to substantiate deductions and must be kept for as long as they are important for federal tax purposes.
+2. **Types of Records to Keep:**
+   - **Receipts:** Keep receipts for all deductible expenses.
+   - **Mileage Logs:** If deducting vehicle expenses, keep a log of business miles driven.
+   - **Invoices and Canceled Checks:** Necessary for substantiating payments made for deductible expenses.
+
+## Example of Deducting Business Expenses
+1. **Illustrative Example:** Provides a detailed example showing how to deduct various business expenses, including rent, salaries, and travel expenses.
+
+---
+
+# Chapter 11 Quiz Questions
+
+1. **What is the general rule for deducting meals as a business expense?**
+   - **Answer:** Generally, only 50% of the cost of meals is deductible as a business expense.
+
+2. **Are fines and penalties deductible as business expenses?**
+   - **Answer:** No, fines and penalties are generally not deductible as business expenses.
+
+3. **What must part of your home be used for in order to qualify for the home office deduction?**
+   - **Answer:** Part of your home must be used regularly and exclusively for business to qualify for the home office deduction.

_pages/p17.chapter.12.md

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+---
+layout: post
+title: p17.chapter.12.pdf
+--- 
+
+# Chapter 12: Business Use of Your Home
+
+## Introduction
+- Provides detailed guidance on how to determine and calculate the deduction for the business use of your home, commonly known as the home office deduction.
+
+## Qualifying for a Deduction
+1. **Exclusive Use Requirement:**
+   - Part of your home must be used exclusively and regularly for conducting business to qualify for the deduction.
+2. **Principal Place of Business:**
+   - Your home must be the principal place of business, or a place where you regularly meet clients or customers.
+3. **Separate Structure:**
+   - The deduction may also apply to a separate structure not attached to your home, such as a studio, garage, or barn, used exclusively and regularly for business.
+
+## Types of Deductible Expenses
+1. **Direct Expenses:**
+   - Expenses only for the business part of your home, such as painting or repairs in the area used for business, which are fully deductible.
+2. **Indirect Expenses:**
+   - Expenses for keeping up and running your entire home, such as insurance, utilities, and general repairs, which are deductible based on the percentage of your home used for business.
+3. **Unrelated Expenses:**
+   - Expenses for parts of your home not used for business, such as lawn care or painting a room not used for business, are not deductible.
+
+## Calculating the Deduction
+1. **Simplified Option:**
+   - Deduct $5 per square foot of home used for business, up to a maximum of 300 square feet, for a maximum deduction of $1,500.
+2. **Regular Method:**
+   - Calculate the percentage of your home used for business by dividing the area used for business by the total area of your home.
+   - Apply this percentage to indirect expenses to determine the deductible amount.
+3. **Example Calculation:**
+   - Provides a step-by-step example of how to calculate the home office deduction using both the simplified and regular methods.
+
+## Limits on the Deduction
+1. **Gross Income Limitation:**
+   - The total deduction for the business use of your home cannot exceed the gross income from your business, minus business expenses other than the home office deduction.
+2. **Carryover of Unused Deduction:**
+   - If your home office deduction is limited by your gross income, you can carry over the unused deduction to the next year.
+
+## Deduction for Employees
+1. **Eligibility:** 
+   - The home office deduction is generally not available for employees unless the use of the home office is for the convenience of the employer and is required as a condition of employment.
+2. **Employee Business Expenses:**
+   - Deductible employee expenses are limited and subject to the 2% of adjusted gross income (AGI) floor.
+
+## Recordkeeping Requirements
+1. **Importance of Records:**
+   - Keep accurate records of all expenses related to the business use of your home, including receipts, canceled checks, and other documents that support your deduction.
+2. **Examples of Records:**
+   - Utility bills, mortgage interest statements, insurance statements, and property tax records.
+
+---
+
+# Chapter 12 Quiz Questions
+
+1. **What is the maximum home office deduction using the simplified method?**
+   - **Answer:** The maximum home office deduction using the simplified method is $1,500.
+
+2. **Can expenses for a separate structure not attached to your home be deducted?**
+   - **Answer:** Yes, expenses for a separate structure not attached to your home, used exclusively and regularly for business, can be deducted.
+
+3. **What is required for employees to qualify for the home office deduction?**
+   - **Answer:** Employees must use the home office for the convenience of the employer and it must be a condition of employment to qualify for the home office deduction.