Article Abstract:
The tax treatment of expenses and income related to business rental property is discussed. Advanced rent is generally taxable when it is received. Security deposits are treated in much the same way as loans, although payments labeled as security deposits may not necessarily be treated that way for tax purposes. The tax treatment of leasehold expenditures such as broker's commissions and legal fees depends on the nature of the expenditure. Leasehold improvements made by the tenant may be either capital expenditures or a substitute for rent. Lease cancellation payments made by the tenant are fully deductible at the date of termination.
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Article Abstract:
The Tax Reform Act of 1986 has reduced the deductibility of business expenses, and has imposed stricter rules on the documentation of travel and entertainment expenses. Deductions for meals and entertainment have been limited to 80% percent of the amount otherwise deductible. A two percent floor on miscellaneous itemized deductions has been imposed. Documentation of travel and entertainment expenses must include the dollar amount of the expenditure, the time and place where the expense was incurred, the business purpose of the expenditure, and the business relationship of the taxpayer and the person entertained.
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Article Abstract:
Gains may be recognized on transfers of property to a corporation when liabilities are transferred to the corporation, or when short-term notes are received from the corporation. Gain is recognized to the extent that property other than stock is received for the transferred assets. The definition of what constitutes a security and the rules for transferring liabilities are discussed.
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