...Ampersand LLP Beaumont, TX TO: Partner FROM: Staff Accountant DATE: March 24, 2016 ------------------------------------------------- SUBJECT: Memorandum Privileged and Confidential Relevant Facts In 2013, Mr. Hobby suffered serious bodily injury while working at a local refinery in Beaumont. On his 2013 tax return, he deducted medical expenses of $25,000. On his 2014 tax return, he deducted medical expenses of $15,000. In 2015, Hobby won a civil lawsuit connected to his injury in 2013. He was awarded as follows: Punitive damages $150,000.00, reimbursement of medical expense $40,000.00, emotional distress $75,000.00, pain/suffering $200,000.00, interest $7,500.00, and attorney’s fees $25,000.00, totaling $497,500.00. Specific Issues Which portion of the award for damages is taxable in 2015? Support and Analysis Per IRC §104(a)(2), any damages (excluding punitive) received on account of personal physical injury are excluded from gross income. Therefore, both $75,000 for emotional distress and $200,000 for pain and suffering are a result of the injury and can be excluded from income. Treas. Reg. §61.1-14(a) specifies “for example, punitive damages…are gross income” meaning that the $150,000 of punitive damages from this lawsuit are considered gross income. These are considered income because the punitive award is primarily to punish the wrongdoer, and is not compensatory for the physical injury. However, IRS publication 4345 (Rev 4-2015) explains that income...
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...Memorandum To: John & Jane Smith From: Andrea R. Martinez Date: 11/28/2013 Re: Tax Issues Per my conversation with Mr. and Mrs. Smith regarding their specific tax issues, I have done some research on each matter. The recommendations that follow will be beneficial in helping to reduce their tax liabilities. 1. John Smith tax issues: a) How is the $300,000 treated for purposes of Federal tax income? Gross income, as defined in IRC 26 § 61, is “all income from whatever source derived, including (but not limited to) the following items: (1) compensation for services, including fees, commissions, fringe benefits, and similar items.” (IRC 26 § 61(a)(1)). With this understanding, the $300,000 is considered fees and must be treated as gross income, and is subject to Federal income taxes. Based on the verbiage from the IRS, “an LLC with only one member is treated as an entity disregarded as separate from its owner for income tax purposes (but as a separate entity for purposes of employment tax and certain excise taxes), unless it files Form 8832 and affirmatively elects to be treated as a corporation.” (IRS.gov). John will be expected to report the full $300,000 of earned income on Schedule C of his individual tax return, or can be claimed as gross income on the LLC return. Based on the variance in state laws, a single person LLC can report income on the business return or individual. An LLC is considered...
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...Standard Federal Tax Reporter (2013), Sec. 117. QUALIFIED SCHOLARSHIPS Click to open document in a browser [->0] 117(a) GENERAL RULE. Gross income does not include any amount received as a qualified scholarship by an individual who is a candidate for a degree at an educational organization described in section 170(b)(1)(A)(ii)[->1]. 117(b) QUALIFIED SCHOLARSHIP. For purposes of this section 117(b)(1) IN GENERAL. The term "qualified scholarship" means any amount received by an individual as a scholarship or fellowship grant to the extent the individual establishes that, in accordance with the conditions of the grant, such amount was used for qualified tuition and related expenses. 117(b)(2) QUALIFIED TUITION AND RELATED EXPENSES. For purposes of paragraph (1), the term "qualified tuition and related expenses" means 117(b)(2)(A) tuition and fees required for the enrollment or attendance of a student at an educational organization described in section 170(b)(1)(A)(ii)[->2], and 117(b)(2)(B) fees, books, supplies, and equipment required for courses of instruction at such an educational organization. 117(c) LIMITATION. 117(c)(1) IN GENERAL. Except as provided in paragraph (2), subsections (a) and (d) shall not apply to that portion of any amount received which represents payment for teaching, research, or other services by the student required as a condition for receiving the qualified scholarship or qualified tuition reduction. 117(c)(2) EXCEPTIONS. Paragraph...
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...receives $400 per month for this. The basement space does not have a separate entrance. Taxpayer reports this rental income on Schedule E. * Taxpayer deducted expenses for 80% of mortgage interest and taxes on Schedule A and 20% on Schedule E. Issues: * Is the exclusion of a rental allowance for a minister, provided in IRC §107(2), a violation of the Establishment Clause of the First Amendment of the U.S. Constitution? * May the taxpayer exclude a rental allowance from income when he is using it to purchase income-producing property? * Is the deduction of expenses a double benefit if the expenses are incurred for items related to excluded income? * Does a business use exist that justifies the separation of expenses between Schedule A and Schedule E? Authoritative Support: Recently, the constitutionality of the exclusion for a minister’s housing allowance has come into question in the Wisconsin District Court. IRC §107(2), which allows for a rental allowance paid to “ministers of the gospel” to be excluded from income, has been challenged in the Freedom From Religion Foundation, Inc. (FFRF) v. Lew, 112 AFTR 2d 2013-7103 (DC WI, 2013). FFRF claims that as a...
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...S E T No More Ice, Inc. 1 3 4 5 6 7 No More Ice, Inc. E. I. No. 98-7654321 A Schedule Attached to and Made Part of 2012 Form 1120—U.S. Corporation Income Tax Return List of Attached Schedules Schedule O—Consent Plan and Apportionment Schedule Form 1125-A—Cost of Goods Sold Forms 8949—Sales and Other Dispositions of Capital Assets Form 4626—Alternative Minimum Tax—Corporations Schedule D—Capital Gains and Losses Schedule G (Form 1120)—Information on Certain Persons Owning the Corporation’s Voting Stock Form 1125-E—Compensation of Officers Attachment—Supporting Details 9 11 12 13 14 15 16 17 18 19 20 21 INFORMATION FOR INSTRUCTORS CORPORATION PRACTICE SET (2013-2014 EDITION) No More Ice, Inc. Following are details on some of the calculations in the solution. Observations are made on areas which the students may find more difficult. You can reduce the difficulty of the practice set if you so choose by providing your students “clues” (or even the solutions) in some or all of these areas. Paragraph references are to the facts for the practice set. 1. Computation of Cost of Goods Sold (Form 1125-A). Amounts for beginning and ending inventories and for cost of goods sold are provided. Students must “back into” the cost of purchases; e.g., Cost of Goods Sold ........................................................................... Inventory Adjustment Beginning Inventory ...........................
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...CASE STUDY #1 MEMO TO: Taxpayer FROM: DATE: 13 September 2013 RE: Tax treatment of employer-funded health insurance premiums I. FACTS The taxpayer was laid off from ABC Corporation after 15 years of employment. ABC has a health insurance program that provides coverage to all employees, including those who have been laid off or retired within the last two years. ABC continues to pay all health insurance premiums on behalf of the taxpayer even while he is not working. II. ISSUE(S) A. Is the taxpayer required to include the employer-funded health insurance premiums in gross income? III. SHORT ANSWER No. The taxpayer is considered an employee and continues to participate in an employer-funded health plan. The taxpayer is not required to include employer-funded health insurance premiums in gross income. IV. ANALYSIS A. Framework of Authorities 1. Statutory Authority IRC § 106(a) generally allows an employee to exclude employer-provided coverage under a health plan from gross income. 2. Treasury Regulations An employee’s gross income does not include employer contributions to a health plan that provides compensation in the event of personal injury or sickness incurred by the employee or the employee’s spouse and dependents. Treas. Reg. § 1.106-1. 3. Treasury Publications (or IRS Position) In Rev. Rul. 82-196, 1982-2 C.B. 53, an employer contributes to a health plan on behalf of its employee. Under...
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...1. When talking about accounting methods, which of the following statements is false? a. The cash and accrual methods are the principal accounting methods. b. Subject to approval by the Commissioner of the IRS, the use of unspecified accounting methods is permitted. c. Section 453 of the Internal Revenue Code permits the use of the “installment method.” d. The “matching” concept of accounting is useful in understanding the IRS permitted methods of accounting. e. All of the preceding statements are true. 2. The principle which states that property, that has once served to offset taxable income, should be treated upon its recoupment as recovery “of that which had previously been deducted” and be subject to inclusion in taxable income is called: a. the “taxable income” rule. b. the “deduction from taxable income” rule. c. the “lack of taxable benefits” rule. d. the “income averaging” rule. e. None of the above. 3. When speaking about capital losses, what is the difference between the treatment allowed to individuals and corporations? a. capital losses are not allowed to corporations at all. b. capital losses are allowed to individuals to the extent of capital gains only. c. Noncorporate taxpayers are allowed a limited deduction of excess capital losses from ordinary income. d. Corporate taxpayers are allowed a limited deduction of excess capital losses from ordinary income. e. None of the above. 4. Securities dealers are required to employ a mark-to-market...
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...MEMORANDUM To: John and Jane Smith From: XXXXXX, CPA Near Lakes City Date: February 7, 2013 Dear Mr. & Mrs. Smith, Thank you for coming to our offices and allowing us to review and discus your concerns regarding your tax questions. I have been assigned to reply to your questions and I have listed my recommendations below. After you both have reviewed these recommendations, please contact me so we can go over any additional questions you may have. Mr. Smith’s questions: 1(a) How is the $300k treated for purposes of Federal tax income? According to the IRC §61(a)(1), “Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items: (1) Compensation for services, including fees, commissions, fringe benefits, and similar items”, the $300,000 you received must be included as part of your gross income, compensation for services, and as such it is taxable. 1(b) How is the $25,000 treated for purposes of federal tax income? The $25k you received as a recovery for expenses you paid in advance must also be treated as income. In general, an expense cannot be deducted if paid in advance. This is true for both the cash basis method of accounting and the accrual method of accounting. The prepaid amount is treated as an asset with a useful life extending beyond the current tax year, and carried over to the tax year where the expense applies. The Internal Revenue...
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...Ans. 1 As per the rules and regulations in the Internal revenue service the allegation led by the company on the client, in the first case of unreasonable compensation The person's reward must be accepted in proceed by an "certified body." This can be the whole of a committee of the board, board of directors, or persons authorized by the board or other persons to act on its part. Thus, it is not obligatory to have the complete board agree the deal. It can be permitted by a board selected for the idea by the executives committee. They consist of minimum of two board members. However in IRS only one member is required as allowed under state's nonprofit business law. If tolerable by your state's nonprofit corporation act, a sovereign board consisting of non-board members can also be certified by the board to agree such dealings--for example, a board consisting of the managerial principal and chief financial officer. In this scenario there are three major shareholders in which one of the director is having 45% of the voting right there and his son is also having 45% therefore compensation is allowed. (IRS, 2014). This section will be purposed as the allocation is significantly unbalanced if— (i) The percentage which the selection companies stock which is investor owning bears corporation’s all voting stocks immediately after the redemption and was 80 percent for the first time. (ii) The share of the company’s voting stock owned by the investor owning bears corporation’s all voting...
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...Acknowledgements I would like to appreciate God Almighty for his faithfulness and for the strength, without him I am nothing. I would like to thank my supervisor Dr Hatem Ahriz for his guidance throughout the writing of this report. I would like to thank Richboy and Ete Akumagba for their guidance and for proof reading this report. I would like to thank my family for their support and love. ii Abstract This era of explosive usage of networks have seen the rise of several opportunities and possibilities in the IT sector. Unfortunately, cybercrime is also on the rise with several forms of attack including, but not limited to botnet attacks. A Botnet can simply be seen as a network of compromised set of systems that can be controlled by an attacker. These systems are able to take malicious actions as needed by the attacker without the consent of the device owner and can cause havoc. This paper is the first part of a two-part report and discusses on several reportedly known botnets and describes how they work and their mode of infection. Several historic attacks and the reported damage have been given to give a good picture and raise the bar on the capabilities of botnets. Several existing tools have been considered and examined which are useful for detecting and terminating botnets. You would find that each tool has its own detection strategy, which may have an advantage on some end than others. iii Table of Contents Declaration ................
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...Answers: 1. Explain the strategies PrimeCo considered in internationalizing its operations. What are the advantages and disadvantages of each method? The strategies PrimeCo considered to enter the international market are the following along with the corresponding advantages and disadvantages of each strategy. a. Exporting – defined as the marketing of goods produced in one country to another. It is considered to be the easiest way of entering foreign markets. Exporting can be either indirect or direct. In general, the advantages of exporting are: i) manufacturing is home based, hence it is less risky that overseas based, ii) gives an opportunity to “learn” overseas markets before investing in bricks and mortar, and iii) reduces potential risks of operating overseas (FAO, 1997). Some of the disadvantages are: i) limited profit potential, ii) company gains no market information, or experience in new markets, iii) plants may not be located in low cost locations, iv) high transport costs, v) tariffs tend to be highest on finished goods, and vi) loss of control as markets are distant form production (http://uwf.edu/rsjoland/12%20Market%20Entry%20Strategies%20as%20Used%2004%201.pdf). b. Licensing – method of foreign operation whereby a firm in one country agrees to permit a company in another country to use the manufacturing, processing, trademark, know-how or some other skill provided by the licensor. The following are the advantages and disadvantages of this strategy...
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...ACCT 323 Homework 5 Solutions Click Link Below To Buy: http://hwaid.com/ . Umair sold some equipment he used in his business on August 29, 2014, that was originally purchased for $70,000 on November 21, 2013. The equipment was depreciated using the 7-year MACRS method for a total of $18,574. Assume there is no additional netting of gains and losses for this taxpayer. a. Assume Umair sold the equipment for $50,000: (1) What is the amount of realized gain or loss on the sale of the equipment? (2) Is the nature of the gain or loss considered ordinary or long-term? b. Assume Umair sold the equipment for $60,000: (1) What is the amount of realized gain or loss realized on the sale of the equipment? (2) Is the nature of the gain or loss considered ordinary or long-term? 2. Alice owns undeveloped land with an adjusted basis of $140,000. She sells the property to George for $185,000. a. What is Alice’s realized and recognized gain? b. What IRC section does the gain on the property apply? c. If the land is used in a trade or business, what IRC section does the gain on the property apply? 3. Using the following independent situations, answer the following questions: Situation 1 Clara received from her Aunt Sona property with an FMV at the date of the gift of $40,000. Aunt Sona purchased the property five years ago for $35,000. Clara sold the property for $43,000. Assume Aunt Sona does not have MAGI of over $200,000. a . Whaat .i s the basis to Clara? b . Whabt...
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...Check Point Threat Categorization IT240 May 10, 2013 Check Point Threat Categorization |Define each of the following terms in your own words: | | | |Boot sector - Is the area of the computer that contains storage devices like hard drives, and is the area where the firmware and software boot from | |because the codes are located here. | |File – Is a place where data is stored on a computer, there are many different types of files and most if not all data is stored in a file. | |Multipartite - divided or having many sectors, very applicable to computers since they have many parts and are divided into sectors and sections. | |Macro – Instructions, usually one that can automatically turn into more instructions. | |Trojan horse - A virus that allows a backdoor into a computer affecting the computer without the users knowledge and allows the information stored | |on the infected computer to be stolen. | |E-mail worms – A worm that...
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...History Generosity is a quality, the desire to give to others without being asked. Before even the enactment of any legislation, philanthropists helped to shape the way we organize to support the less fortunate. The history of charitable organizations in the United States originated almost at the same time as the formation of our new nation. Benjamin Franklin, was one the founders of our nations and the earliest American philanthropists. He founded the University of Pennsylvania to educate youth. The early setters formed charitable and voluntary associations to help with issues of the era like education, orphanages, and illness (Arnsberger, Ludlum, Riley & Stanton, 2008 p. 1). Young Americans were able to form charitable organizations to fill gaps in the social welfare programs. Back then, charities were mainly hospitals and orphanages support by religious groups and wealthy individuals. During the 19th century, these organizations were controlled and founded by private corporations or a person (Arnsberger, Ludlum, Riley & Stanton, 2008 p. 2). The bloom of the American industry gave birth to bigger corporations; at the same time, the increase of more formal charitable organizations. It wasn’t until the late 19th century that government began paying more attention to this new sector. The first legislation the government imposed was in1894, the Tariff Act that established a flat two percent tax to corporate income, but excluded charities. However, the Tariff Act was...
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...c. 1935- Social Secruity for the retirment age for 62 but the average living age was 52 so the polticians didn’t set it aside and used it as general funds. d. Union Membership increases in the 1940s at about 43-56% e. World War II- Wage stagnation during the 50s- companies don’t have the direct funds to pay employees. So they begin making retirment plans and giving medical insurance so they don’t loose good employees. f. Medicare and Medicaid- established (Great Society) g. 1974 ERISA, IRC Section 125, HMO Act i. Local state and federal employees were not covered by EIRSA ii. SO they were getting these funds and using them for dead end projects iii. Section 125 actually lays out the tax information iv. HMO- Control health care, before you went to see see a doctor you had to get pre approval. h. Today’s Health Care Debate i. The Great Depocal “Obama Care” ii. That everyone should be given health care iii. July 1, 2013 is the first medical step iv. Universal January 1st 2013 first tax break v. If Republicans gain control of the senate or the house then they will have a senate override 2. Identify and describe the minimum standards for qualified plans. 3. 4. Contrast flat benefit and unit benefit formulas. 5. Focus on Chapter 10 terminology concerning both retirement plans and health insurance a. ERISA Title 1 requirment i. Reporting and disclosure requirments ii. How do you handle their health care after they retire iii. Under EIRSA employee pension benefits...
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