In order for an expense to be ordinary it must be reasonable in amount and it must bear reasonable and proximate relationship to the income-producing activity or property. A payback agreement must meet the following requirement to be effective. It must be entered into before the payment is actually made. It must not be entered into before the payment is actually made. The payback agreement must not be included in the general corporate bylaws rather than in a specific contract with a employee.
Taxpayers use care in timing the realization of items of income and expense.
Right, because if an activity has shown a profit in only two out of the previous four years, a taxpayer may consider accelerating some of the income into the fifth year or deferring some of the expenses of the activity into the following year. Right, because it merely compels the IRS to prove that the activity is not a business. Gross income exceed the deductions from the activity in a least three out of five consecutive years. Right, because the activity is presumed to be a business, and the limits on the deductibility of expenses do not apply. All of the above are correct.