The irs adjustment caused a tax deficiency to be assessed

Reference no: EM131014925

Samuel had worked for Pearl Inc., for 35 years when he was discharged and his position filled by a much younger person. He filed and pursued a suit for age discrimination and received an award of $1.5 million. Under the contingent fee arrangement with his attorney, one third of the award was paid directly too the attorney, with the balance going to Samuel. Of the $1.5 million received, Samuel included his net $1 million as gross income on his tax return; he neither took as gross income nor deducted the $500,000 paid to the attorney.

The IRS audited Samuel's return and included the $500,000 contingency fee in gross income. At the same time, Samuel was allowed a miscellaneous itemized deduction (subject to the 2% floor) for the fee paid to the attorney. The IRS adjustment caused a tax deficiency to be assessed for both the regular income tax and the AMT.

Reference no: EM131014925

Questions Cloud

Compute the dividend for the current year : Tin-Tin Waste Management, Inc., is growing rapidly. Dividends are expected to grow at rates of 30 percent, 35 percent, 25 percent, and 18 percent over the next four years. Thereafter, management expects dividends to grow at a constant rate of 7 perce..

Strategies in response to each identified planning need : Write at least one primary and one alternative recommendation from selected strategies in response to each identified planning need. More than one recommendation may be needed to address all of the planning needs. It is suggested that each recommenda..

What is the temperature of the final state : A diaphragm separates the two compartments. Each compartment has a volume of 1 L. Suddenly, the diaphragm ruptures. Use the vander Waals equation for any nonideal behavior. What is cv at the initial state?

Conduct a current health insurance situation analysis : Conduct a current health insurance situation analysis for the Bedos. Be sure to assess the following: a. The after-tax costs of their current plans compared to purchasing an individual policy. b. The use of a tax-advantaged account as a health insura..

The irs adjustment caused a tax deficiency to be assessed : The IRS adjustment caused a tax deficiency to be assessed for both the regular income tax and the AMT.

How much is the investment worth in todays terms : An investment offers the following cash flows: $100 one year from now, $150 two years from now, $150 in 3 years, $900 in 4 years, and $600 in 5 years. If the relevant interest rate is 8% per year (an APR, with interest compounded annually), how much ..

What is the profitability index for above set of cash flow : What is the profitability index for the above set of cash flows if the relevant discount rate is 8 percent? What is the profitability index if the discount rate is 13 percent?

How much heat is transferred this process : The initial pressure is 10 bar, and the initial molar volume is 3 3 1023 m3/mol, and the final volume is 0.05 m3/mol. Take the temperature of the surroundings to be 298 K. Use the van der Waals equation of state and What is the initial temper..

Supplier offers to supply component at an annual payment : Betty's Home Décor is considering whether to produce a component in-house or whether to purchase it from a supplier. A supplier offers to supply the component at an annual payment of $120,000 over three years (payable at the beginning of years 2, 3, ..

User Account

All Pages