Edward recognize income as a result of janets improvements

Assignment Help Taxation
Reference no: EM13851123

Question:

1- A question on a state income tax return asks the taxpayer if he or she made any out-of-state Internet or mail-order catalog purchase during the year . The question requires a yes or no answer and if the taxpayer answer yes the amount of such purchases is to be listed

a. Does such an inquiry have any relevance to the state income tax? If not why is it begin asked?

b. Your client Harriet want to leave the question unanswered . As the preparer of her return , how do you respond?

2- Assess the probability of an audit in each of the following independent situations.

a. As a result of a jury trial, Linda was awarded $3.5 million because of job discrimination. The award included $3 million for punitive damages.

b. Mel operates a combination check-cashing service and pawnshop.

c. Jayden, a self-employed trial lawyer, routinely files a Schedule C (Form 1040) that, due to large deductions, reports little (if any) profit from his practice.

d. Bernard is the head server at an upscale restaurant and recently paid $1.8 million for a residence in an exclusive gated community.

e. Homer has yearly Adjusted gross income (AGI) of around $70,000 and always claims the standard deduction. He works for a builder installing wallboard in new homes.

f. Gloria lost a Form 1099-DIV that she received from a corporation that paid her a dividend.

g. Cindy, a former vice president of a bank, has been charged with embezzling large sums of money.

h. Giselle is a cocktail waitress at an upscale nightclub. She has been audited several times in past years.

i. Marcus was recently assessed a large state income tax deficiency by the state of California for his utilization of an abusive tax shelter.

j. Guy, a professional gambler, recently broke up with his companion of ten years and married her teenage daughter.

3- On a Federal income tax return filed five years ago, Andy inadvertently omitted a large amount of gross income.

a. Andy seeks your advice as to whether the IRS is barred from assessing additional income tax in the event he is audited. What is your advice?

b. Would your advice differ if you are the person who prepared the return in question? Explain.

c. Suppose Andy asks you to prepare his current year?s return. Would you do so? Explain

4- Discuss the probable justification for each of the following aspects of the tax law:

a) a tax credit is allowed for amounts spent to furnish care for minor children while the parent works.

b) deductions for interest on a home mortgage and property taxes on a personal residence.

c) the income splitting benefits of filing a joint return.

d) gambling losses in excess of grambling gains

e) Net operating losses of current years can be carried back to profitable years.

f) a taxpayer who sells property on an installment basis can recognize gain on the sale over the period the payments are received.

g) The exclusion from federal tax of certain interest income from state and local bonds .

h) prepaid income is taxed to the recipient in the year received and not in the year it is earned.

5- Edward leases real estate to Janet for a period of 20 years. Janet makes capital improvements to the property. When the lease expires, Edward reclaims the property, including the improvements made by Janet

a) Under current law, at what point does Edward recognize income as a result of Janet?s improvements?

b) Has the law in part (a) always been the rule?

c) What is the justification, if any, for the current rule?

Verified Expert

Reference no: EM13851123

What is the after-tax cost of preferred stock

A firm's preferred stock pays an annual dividend of $2, and the stock sells for $65. Flotation costs for new issuances of preferred stock are 5% of the stock value. What is

Advise abc of its fbt consequences arising out

Advise ABC of its FBT consequences arising out of the above information, including calculation of any FBT liability, for the year ending 31 March 2015 - How would your answe

What is the appropriate tax treatment of the payment

Seller Pty Ltd makes a payment of $10 000 to Buyer Pty Ltd to cover the cost of in-store promotional activities relating to its products. What is the appropriate tax treatm

Explain what is meant by negative gearing

In your response you must explain what is meant by negative gearing and how capital gains arising from property investment are treated. You should refer to sections of legis

Claim to reduce his payments on account

Evan did not receive a tax return for 2010-11 but he was aware that he had income which had not been assessed to tax. He notified HMRC of this fact on 2nd October 2011 and a

Discuss possible defences that could be argued by big bank

Discuss possible defences that could be argued by Big Bank and Cyclone, and what Big Bank and Cyclone should have done to limit their legal liability. For this assignment answ

What tax issues are relevant to really

Another disqualified person has agreed to match this support if Really Welcome will appoint him to the organization's board of directors. What tax issues are relevant to R

Prepare a tax basis balance sheet for the partnership

Depreciated the building strait line over 30 years. The building represents 80% of the above allocation and land represents the remaining 20%. This apartment building was ju

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd