Individual Income Taxes

Running head: INDIVIDUAL INCOME TAXES
Individual Income Taxes
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1INDIVIDUAL INCOME TAXES
Facts:
Deanna and Thomas Spartan built an apartment in Boulevard in Hillsborough County, Florida in
October 2005. The apartment was built on a land which was acquired in January 2005. The
apartment was transferred subsequently to Triton Properties LLC. The LLC has suffered a loss
due to the depreciation on the building in each year. The Internal Revenue Services has
disallowed the loss from Triton Properties LLC as set off against the income earned from
Spartan office.
Issue:
Issue here is to determine whether the action of IRS to disallow the loss from Triton LLC as set
off against the income from Spartan office is justified.
Answer:
The decision of IRS to disallow the loss from Triton Properties LLC to set off against the income
of Spartan Office LLC. The decision to disallow excessive rent as deduction is also correct as
section 162 specifies only reasonable expenses to be deducted for computing taxable income.
Rationale:
Internal Revenue Service is a separate department of the Treasury in United States of America
responsible for imposing and collecting taxes from individuals and businesses in the country. 26
US Code’s section 162 defines the expenditures that are allowed as deduction for computation of
business expenditures. A brief discussion about the section will help in understanding the
provision in respect of eligible business and trade expenses to compute taxable income of a
business.