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Tax Administration: Recurring Issues in Tax Disputes Over Business Expense Deductions

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Report Type Reports and Testimonies
Report Date Sept. 26, 1995
Report No. GGD-95-232
Subject
Summary:

Every year, the Internal Revenue Service (IRS) audits the tax returns of more than one million taxpayers, adjusting the tax liability of those who IRS believes did not comply with the provisions of the tax code. Taxpayers may challenge the proposed adjustments by filing a protest with IRS. This report discusses the issues that caused the most frequent disputes between IRS and taxpayers in connection with section 162 of the tax codes, which allows taxpayers to deduct from income "ordinary and necessary" expenses related to trade or business. GAO has previously reported that section 162 was the tax code section mode commonly cited in large tax cases at the IRS Office of Appeals.

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