35 Miss. Admin. Code Pt. III, Subpt. 5, Ch. 01 — Business Deductions

100 The taxable income on which the income tax is based is the gross income of the taxpayer,
less certain specific deductions allowed by law plus, in the case of individuals, trusts and
estates, certain specific amounts for personal and additional exemptions. The allowance for
deductions fall into three basic classes; namely,

# 1.

Ordinary and necessary expenditures connected with a trade or business.

# 2.

Adjustments to gross income.

# 3.

Non-business individual itemized deductions or standard deduction.
101 Business deductions falling within class 1 above are deductible from the gross profit of the
trade or business to determine the net profit or loss of the business activity. Deductions
falling within class 2 above are deductible from the gross income of the taxpayer to
determine net income, commonly referred to as adjusted gross income, and may be claimed
by the individual regardless of whether non-business deductions are itemized. Deductions
falling within class 3 are generally personal in nature and may be claimed only when
itemized. In lieu of itemizing personal non-business deductions, the individual may elect to
claim the optional standard deduction.
102 Under no circumstances, may an item of expense be deducted as both a business deduction
and a non-business deduction, either in fact or in effect, in the taxable year.
103 Business expenses deductible from gross income include the ordinary and necessary
expenditures directly connected with or pertaining to the taxpayer's trade or business. The
cost of goods purchased for resale, with proper adjustment for opening and closing
inventories, is deducted from gross sales in computing gross income.
104 Among items included in business expenses are management expenses, commissions,
labor, supplies, incidental repairs, operating expenses of automobiles used in the trade or
business, traveling expenses while away from home solely in the pursuit of a trade or
business, advertising and other selling expenses, together with insurance premiums against
fire, storm, theft, accident or other similar losses in the case of a business and rental for the
use of business property.
105 However, no such item shall be included in business expenses to the extent that it is used
by the taxpayer in computing the cost of property included in its inventory or used in
determining the gain or loss of its plant, equipment or other property. The full amount of
the allowable deduction for ordinary and necessary expenses in carrying on a business is
deductible, even though such expenses exceed the gross income derived during the taxable
year from such business.
106 The following requirements determine whether a particular item of expense is deductible as
a business expense: It must be incurred in a trade or business carried on by the taxpayer.
This excludes all personal expenses as well as expenses sustained in earning income, but
not arising from a trade or business. Expenses directly related to earning exempt income
are not deductible.
107 The "expense" cannot be a capital expenditure.
108 The expenses must be ordinary, necessary and reasonable. To the extent that an expense is
unreasonable, it is not necessary and will not be allowed as a deduction.
109 (Reserved)
110 (Reserved)
Chapter 02 Expenditures Attributable to Lobbying, Political Campaigns, Attempts to
Influence Legislation, etc., and Certain Advertising
100 A taxpayer may take a business expense deduction for an ordinary and necessary
expenditure in regard to certain types of activities relating to promoting or combating
legislation. An expense is deductible if it is paid or incurred (1) in direct connection with an
appearance before, submission of statements to, or sending communications to,
Congressional Committees or legislative bodies of states, U. S. possessions, etc., in regard
to legislation of direct interest to the taxpayer, or (2) in direct connection with
communication of information between the taxpayer and a trade or business organization of
which he is a member concerning legislation of direct interest to both parties.
101 A portion of the dues for membership in an organization engaged in such activities is
deductible. The deduction is limited to that portion which is attributable to the expenses
incurred by the organization engaged in such activities.
102 However, expenses incurred in an attempt to influence the general public, or segments
thereof, are nondeductible. This limitation applies to a corporation's attempt to influence its
shareholders.
103 Political contributions are not deductible either as business expenses or as charitable
contributions.
104 Deductions otherwise allowable as a business expense shall not be allowed for any amount
paid or incurred for admission to any program or event identified with a political candidate
or party or if any portion of the proceeds from such program or event inures to or for the
use of the party or candidate.
105 Expenditures for institutional or "good will" advertising which keeps the taxpayer's name
before the public are deductible business expenses if the expenditures are related to the
patronage the taxpayer might reasonably expect in the future.
106 (Reserved)
107 (Reserved)