Question

Joe would really like to reduce the Corporation’s taxable income for this first year. Can he deduct (deductible whether in partial or in whole) the following items?

A. Both Deductible B. Both Non-deductible
C. Deductible, Non Deductible D. Non-deductible, Deductible

Answer 1

Joe cannot deduct corporate income tax on profits, individual income tax on his salary, nor payroll tax on wages as they are typically non-deductible obligations rather than business expenses that can reduce the corporation's taxable income.

Step-by-step explanation:

When attempting to reduce the corporation's taxable income in its first year, Joe must understand which expenses are deductible and which are not. Taxes such as the corporate income tax on profits, individual income tax on his salary, and the payroll tax on wages are typically obligatory payments to governmental entities and may not be deductible in the way business expenses are.

Business expenses that are ordinary and necessary for the operation of the business, such as salaries paid to employees (excluding the business owner), rent, utilities, and materials, are generally fully deductible. However, taxes paid on profits, salaries to oneself, and some payroll taxes are not expenditures that reduce taxable income in the same way. They are often considered personal expenses or after-tax obligations.

The answer to whether Joe can deduct these taxes from the corporation's taxable income is likely Both Non-deductible, as these types of taxes are generally not deductible business expenses.