Taxes and Estate Planning

John Smith Tax Issues 1. (a) Amount of $300,000 will be treated as self-employment ordinary income.
Self-employment tax is a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners.
If you use a tax year other than the calendar year, you must use the tax rate and maximum earnings limit in effect at the beginning of your tax year. Even if the tax rate or maximum earnings limit changes during your tax year, continue to use the same rate and limit throughout your tax year. http://www.irs.gov/businesses/small/article/0,,id=98846,00.html 1. (b) Amount of $25,000 was paid to your office as recovery of expenses. If that was previously expensed, it will be considered an income to and will affect your tax rate. If the amount was held in escrow and was not expensed, you may deduct against expenses incurred during the case as business expense.
To give an understanding about “deferred expenses” we will define it as assets used to enable cash paid out to counterpart of goods or services to be received in a latter accounting period when fulfilling the promise to pay is acknowledged.
Even if a location tax incentive were treated as an amount paid to the taxpayer, it is generally not conditioned on the taxpayer’s actual use of the amount to acquire capital assets, and thus does not become a permanent part of working capital. In substance the incentive is simply a recovery of expenses of operations. See, e.g., Springfield Street Railway, supra (state grants based upon excise tax liabilities were reductions in tax liability and not contributions to capital, even though taxpayer acquired capital assets with the grants). The essence of a capital contribution is that it is used to enhance the