Reasonable and necessary business expenditures that are not completely deductible in the year incurred will be...

Reasonable and necessary business expenditures that are not completely deductible in the year incurred will be (1) depreciated, (2) amortized, or (3) capitalized. Briefly define and provide an example of an expenditure to each.

Expert Solution

Reasonable and necessary business expenditures that are not completely deductible in the year incurred will be Amortized.

Depreciation:- It is systematic allocation of cost of a tangible asset over its useful life. Example, Car purchased having life 5 years.Then car will be depreciated in 5 years

Amortization:- It is systematic allocation of cost of an intangible asset over its useful life. Example, Telecommunication licence purchased having life 10 years. Licence will be amortized in 10 years.

Capitalized- It is capitalization of an expenditure which will provide benefit to an organization for more than 1 year. If it is land then it is not depreciated at all. If it is any other asset lets say Machinery, then it will be depreciated/amortized each year as per its useful life.

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ekkarill92 answered 11 months ago

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Reasonable and necessary business expenditures that are not completely deductible in the year incurred will be...

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