1(a). Mr. Smith, to answer your first question, regarding the tax treatment of $300,000, fee received by you. First of all let me explain how LLC works. LLC is a limited liability company and is not a separate tax entity like a corporation; instead, it is what the IRS calls a "pass-through entity," like a partnership or sole proprietorship. All of the profits and losses of the LLC "pass through" the business to the LLC owners (called members), who report this information on their personal tax returns
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AC553 – You Decide 1. John Tax Issues: a. How is the $300,000 treated for purposes of Federal tax income? The $300,000 is included in John’s Gross Income. Section 61 of the IRS Tax code generally defines gross income as all income from whatever source derived, including the compensation for services, fees, commissions, fringe benefits and similar items. Therefore the $300,000 is classified as compensation John received for legal services rendered. b. How is the $25,000 treated
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entrepreneurs, and small business owners. John Smith, Esq., a practicing attorney with offices near yours, walks in your office and wants advice from you relating to a recent influx of cash he received as a result of winning a large jury verdict on behalf of his client in a personal injury case. His wife Jane Smith accompanies him during your meeting because she has some additional tax planning advice to ask of you. Role After reviewing John and Jane Smith’s points of view, it will be your turn
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AC 553 YOU DECIDE WEEK 4 BEM TAX SERVICES MEMO TO JOHN AND JANE To purchase this visit here: http://www.nerdypupil.com/product/ac-553-you-decide-week-4-bem-tax-services-memo/ Contact us at: nerdypupil@gmail.com AC 553 YOU DECIDE WEEK 4 BEM TAX SERVICES MEMO TO JOHN AND JANE AC 553 You Decide Week 4 BEM Tax Services BEM Tax Services Memo To: John and Jane Smith From: Benedict Mitchell Date: [ 10/7/2011 ] Re: Tax Issues Upon reviewing the information you submitted to me concerning your
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Re: Tax Issues Relevant Facts John Smith, Esq. worked on a case for over two years. The jury awarded his client $2,000,000 in damages, of which his fee was $300,000 plus recovery of expenses paid up front in the amount of $25,000. John is also thinking about buying the building that he currently leases his office space in. His current lease is $3,500 per month. John Smith’s business is a separate law practice established as an LLC. Jane Smith sells handcrafted jewelry which earned her $20
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MEMORANDUM TO: JOHN SMITH, JD FROM: , CPA DATE: MARCH 25, 2012 SUBJECT: Recommendations of tax affairs for prospective clients John and Jane Smith Thank you for stopping by my office on Monday to discuss the relevant inquiries you and your wife Jane have while planning your 2011 tax return. I am only responding to the issues we discussed. I am confident that I can provide the best guidance to minimize your tax liability for I have been in practice for 5 yrs. As you know, there
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John Smith Tax Issues: John Smith was not considered the injured party in the lawsuit, he was the acting attorney representing a client whom was injured in an incident. John Smith was providing a service at the time and the $300,000 is considered payment for the service of representation in a legal matter. According to section 61 of the Internal Revenue Code any gross income is taxable for federal income tax regardless of the source or matter in which it was obtained. In particular compensation
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1. John Smith tax issues: a. How is the $300,000 treated for purposes of Federal tax income? The $300,000 is taxable income; the reason is that the IRS always collects taxes when we receive a lump sum payment as compensation for negligence, injury or other wrongdoing. Litigants are allowed to bring up a taxation lawsuit in the case of lump sum payments. Mr. Smith, you will have to take all of the necessary steps to make sure that the amount is paid to the government on time so that no fines
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MEMORANDUM TO: John and Jane Smith FROM: DATE: 11/20/2011 RE: Tax Issue | John Smith Tax Issues In regards to the $300,000 earnings from the court case this should be treated as gross income. Since the $300,000 compensates for services, including fees the earning must be classified as gross income (Cornell University Law School, 2011). The $25,000 is compensation from the expenses paid at the beginning of the trial and can be treated as an adjusted gross income and can be deducted
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NearLakes City John Smith tax issues 1 a Issue: Treatment for purposes of Federal Tax Income of $300,000 fee received out of the amount awarded by Jury. Applicable Law: Any winnings in a personal injury lawsuit that cover the treatment of physical injuries are not taxable except for attorney fees which are taxable. IRC Sec 104(a)(2).Taxability also depends upon the place of residence of the taxpayer. Conclusion: As per the provisions of IRC Sec 104(a) (2), $300,000 received by John Smith as fees from
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