Deductibility refers to the ability of a taxpayer to deduct certain expenses from their taxable income, thereby reducing the amount of income that is subject to taxation. This concept plays a critical role in determining the tax liability of individuals and entities, impacting how expenses are treated in financial reporting and tax compliance. Deductibility can vary significantly based on the nature of the expense and the taxpayer's situation, which is particularly relevant in specific contexts like built-in gains tax and passive income restrictions.
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