harold__petersan__and_sarah__peter...

Jun 2nd, 2015
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Ch6.1. Discuss the definition of trade or business. Why does it matter whether a taxpayer is classified as an employee or as self-employed?A trade or business is any activity that is engaged in for profit. The profit motive is necessary, and the activity should be engaged in with continuity and regularity. The income from a sole proprietor is netted with related ordinary and necessary business expenses to determine the effect on AGI. 2. Discuss the concepts of ordinary, necessary, and reasonable in relation to trade or business expenses.Ordinary: it must be customary or usual in the taxpayers particular business. Necessary: refers to an expense that is appropriate and helpful rather than one that is essential to the taxpayers business.Reasonable: reasonable in amount and reasonable in relation to its purpose. In most situations, making payments to re

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