What does trade or business mean on the CPA exam?
Trade or business. An activity carried on regularly, continuously and with a profit motive. The test separates deductible business expense from a hobby and decides whether income is self-employment income.
Defined against Sec. 162.
Which CPA exam sections use trade or business?
Trade or business appears in 6 CPA exam sections: AUD, BAR, FAR, ISC, REG, TCP.
Related terms
- passive activity: A trade or business in which the taxpayer does not materially participate, plus most rental activity.
- qualified business income: The net income from a domestic pass-through trade or business, excluding investment income and reasonable compensation.
- capital asset: For tax, almost everything a taxpayer owns EXCEPT inventory, receivables, and depreciable or real property used in a trade or business.
- earned income: Compensation for personal services -- wages, or net earnings from self-employment.
- separately stated item: Income, deduction or credit that keeps its own character as it passes through to the owner, because the owner's own situation decides how it is taxed.
- excess business loss: The amount by which a noncorporate taxpayer's aggregate business deductions exceed business income plus a threshold.