TN 9 (02-98)
RS 01803.110 Business Deductions
In computing NESE, all of the business expenses which are deductible under the IRC must be subtracted from total receipts. Even if a deduction is not claimed for income tax purposes, it must be taken in computing NESE.
An individual who incurs (i.e., becomes liable for) a business expense should take the deduction even though actual payment is made by someone else. A deduction may be taken even if paid in a medium other than cash.
The most common business expenses are listed on the IRS tax schedules C and F.
1. When to Question Deduction
Do not question the amount of a deduction or the failure to take a deduction merely on suspicion that an error has been made. If evidence gives reason to doubt the correctness of the return, obtain enough information to make a determination.
2. Technical Advice
Discuss the matter with the DDIR whenever technical advice on income tax law and regulations is needed, or review one of their specialized publications, such as Tax Guide for Small Businesses, Publication No. 334.