Buying land would technically be a capital expenditure where you can only claim a deduction if the land becomes less valuable. If you're talking about more "normal" business purchases like computers or equipment you get to deduct a portion of the expense every year as it depreciates. So if you buy a $2k laptop for a developer and in 1 year it's now worth $1500 then you can deduct $500.
For a business that really doesn't make a difference. If you have $1 billion in revenue but spent $999,999,999 in order to generate the revenue then your business income is $1.
Or the complete logical extreme. If I sell a dollar bill for $1 that's not income that should be taxed.
> If I sell a dollar bill for $1 that's not income that should be taxed.
You always have overhead so you can’t actually sell 1$ for 1$. Breaking even requires selling assets for more than their worth to cover transaction fees. We let companies deduct those fees, but what’s a fee and what’s an investment gets blurred. Especially when most companies don’t suddenly get destroyed after a single transaction. The classic razor and blade model being a prime example for hiding profits.
Sure, cash flow may make it seem minimally profitable, but that’s only relevant in this quarter or if you run out of cash. Spend X million on software development or brand advertising and can have a tax free transfer from income to capital. Leverage that for a few decades and suddenly your business is worth 10x as much without any apparent profit. Clearly an asset was being invested in.
For a business that really doesn't make a difference. If you have $1 billion in revenue but spent $999,999,999 in order to generate the revenue then your business income is $1.
Or the complete logical extreme. If I sell a dollar bill for $1 that's not income that should be taxed.