Discussion What is the distinction between deductions for AG

Discussion

What is the distinction between deductions for AGI and deductions from AGI and why should this be important for individuals?

As you review deductions from AGI and for AGI, how should bribes and kickbacks be treated for tax purposes? Are they a deduction and are they allowed? As you may recall, Al Capone’s conviction caused mobsters and other illegal gangsters to rethink their method of keeping detailed records. Why did this rethink occur? How different was this situation of bribes and kickbacks to how multimillion-dollar corporations do business now?

Solution

For AGI deduction is also called above-the-line deduction, which is better than deduction from AGI. Three reasons, first of all, above-the-line deductions let you reduce your AGI. Reduced AGI might qualify you for other tax credits. Second, if you are subject to AMT (Alternative Minimum Tax), above-the-line deductions pass thru AMT while many other deductions would be disallowed. Finally, you can take above-the-line deductions whether you itemized or not. Deductions from AGI include capital expenditure advised by physician,long term insurance,medical insurance premium and necessary travelling expeneses etc. These deductions are important for an individual as these documents do help an individual to make sure that he claims them in a proper manner so that it is possible for him to reduce his tax liability to an extent level Treatment of Bribes and Kickbacks In Unites states of America , bribes do not have any kind of tax liability .Earlier Bribes to foreign officials was allowed as tax deduction but, it is not tax deductible. For KICKBACKs also there is no provision for allowing deduction . If the payment is made to an official or employee of any govt. thenn, such kind of payment shall be considered to be unlawful under foreign corruct practise act-1 Notes: Al Capone ran many illegal businesses including bootlegging, gambling, prostitution, and murders. There were many gangs in the world of organized crime and Al Capone’s was at the top. Al Capone was the most infamous gangster in the 1920’s. Being a highly know and revered gangster was a big business. Money was made fast and very easily. Bootlegging alcohol was by far the most profitable in the 1920’s; this was because of the prohibition of alcohol. Gambling was another business that paid off; stations sanctioned for gambling were set up all over cities When no other crimes could be pinned to Al Capone, the Internal Revenue Service obtained a conviction for tax evasion. As the astonished Capone left the courthouse he said, \"This is preposterous. You can\'t tax illegal income!\" But the fact is income from whatever source derived (legal or illegal) is taxable income.