David, a newly licensed CPA, opened an office in 2019 as a sole practitioner engaged in the practice of public accountancy. David reports on the cash basis and has adopted the calendar year for income tax reporting purposes. David has many items for both business and personal matters that can be included in income and as deductions.

1. Fee for the biennial permit to practice as a CPA

2. Alimony paid to his former spouse, pursuant to a divorce finalized in 2015, who reports the alimony as taxable income

3. Personal medical expenses charged on a credit card in December 2019 but not paid until January 2020

4. Gambling losses

5. Insurance premiums paid on David’s life

6. Penalty paid to bank on early withdrawal of savings

7. Interest income on mortgage loan receivable

8. Write-offs of uncollectible accounts receivable from accounting practice

9. Foreign income tax withheld at source on dividend received

10. Employer’s portion of self-employment tax paid with 2019 return filed in April 2020

Options:

Not taxable

Deductible on Schedule 1 of Form 1040 to arrive at adjusted gross income

Deductible in full in Schedule A -- Itemized Deductions, 100% deductible

Deductible in Schedule A -- subject to threshold of 10% of adjusted gross income

Deductible in Schedule A -- limited to gambling winnings

Deductible in Schedule B -- Interest and Dividend Income

Deductible in Schedule C -- Profit or Loss from Business

Deductible in Schedule D -- Capital Gains or Losses

Deductible in Schedule E -- Supplemental Income and Loss

Deductible in Form 4797 -- Sales of Business Property

Claimed in Form 1116 -- Foreign Tax Credit, or in Schedule A -- Itemized Deductions

Based on gross self-employment income

Based on net earnings from self-employment

Not deductible

Taxable as interest income in Schedule B -- Interest and Dividend Income

Taxable as other income on Schedule 1 of Form 1040