Source: http://9a4n.com/essay-on/Tax-Case/156126
Timestamp: 2019-01-18 06:30:21
Document Index: 394301917

Matched Legal Cases: ['§61', '§357', '§351', '§357', '§357', '§ 1012', '§ 1224', '§217']

Tax Case - Term Paper
Submitted By larissas
EXECUTIVE SUMMARY The taxpayer, Craig Terry, deducted $6,000 in charitable contribution to his church, which operates his children’s school. The IRS disallowed $4,800 of this deduction claiming that it was tuition. When Terry made the contribution, he was not acting out of pure generosity, but in anticipation that his children would receive an education. Terry made a quid pro quo contribution, in which only the excess of the value of the services received is deductible. We rule in favor of the IRS due to overwhelming legislative support, as outlined below.
* In 2006, Craig Terry “contributes” $6,000 to his church which operates the school that his two children attend. * The school charges no tuition for students to attend, but the families are provided with a suggested donation of $200, which is how much it costs to educate a child per year. However, no child is refused admission to the school if their family is unable to contribute. * The IRS disallows $4,800 of the charitable contribution stating it is tuition. * Terry responds that because the school charges no tuition, the entire $6,000 is deductible. Terry, also, argues that because the IRS allows the Church of Scientology to deduct fees paid to the church for religious education, he should be allowed this deduction as well.
ISSUES Per IRC section 170(c)(2)(B), “a charitable contribution is defined as a contribution or gift to or for the use of a corporation, trust, or community chest, fund, or foundation organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes.” These charitable contributions are deductible by IRC section 170(a)(1). On the other hand, if these charitable contributions fall within the definition of a quid pro quo exchange, then they would not qualify the taxpayer for a deduction in the full amount. IRC section…...
...income for the taxable year in which received by the taxpayer, unless, under the method of accounting used in computing taxable income, such amount is to be properly accounted for as of a different period. Section 1.451-1(a) of the Income Tax Regulations provides that under the cash receipts and disbursements method of accounting, such amounts of an item of gross income are includible in gross income when actually or constructively received. Section 1.451-2(a) of the Income Tax Regulations provides that income, which is not actually reduced to a taxpayer's possession, is constructively received by the taxpayer in the taxable year during which it is made available so that the taxpayer may draw on it at any time, or so that the taxpayer could have drawn on it during the taxable year if notice of intention to withdraw had been given. However, income is not constructively received if the taxpayer's control of its receipt is subject to substantial limitations or restrictions. The United States Tax Court in Paul v. Commissioner held that the taxpayer had not constructively received income at the time he won because he had no unrestricted right to proceeds until his claim was validated and paid by the state lottery commission. This case is a completely different scenario when compared to the one at hand. In Paul v. Commissioner, the taxpayer had very limited time before the end of the year to draw upon the winnings because he won on December 29, 1987. The......
...appealed this case to the Court of Appeals which ruled in the Commissioner’s favor. Finally, the case reached the United States Supreme Court. ISSUE: Whether the transaction to fulfill the marital settlement is a taxable event, and if it is a taxable event, how to determine the taxable gain realized of the transaction. HOLDING: Yes, the transfer of the property to release the husband’s marital obligation is a taxable event. The amount realized in the transaction should be equal to the market value of the property at the time of transfer. LEGAL ANALYSIS: Both the Tax Court and the Court of Appeals for the Sixth Circuit stated that the appreciated property transferred to fulfill the divorce settlement had no tax effect on the transferor because the market value of marital rights which were the amount realized by husband is indeterminable. However, the Courts of Appeals of the Second and Third Circuits argued that by assuming that the value of marital rights had the same value as the transferred property, the amount realized is determinable. SUMMARIZE THE TAXPAYER’S AND THE GOVERNMENT’S ARGUMENT: The taxpayer argued that the property transaction in this situation was a nontaxable, because the transaction was similar to the transfer of the property between the co-owners. He claimed that according to Helvering v. Hallock case, it is meaningless to draw a distinction between the wife’s property received from the husband and the wife’s regular property in term of tax......
...JAMES V. U.S., 61-1 USTC 9449, 7 AFTR2D 1361, 366 U.S. 213 (USSC, 1961) FACTS: In this particular case, the defendant, Eugene C. James, embezzled money from both his union employer as well as an insurance company and failed to include these funds as gross income for tax purposes. The taxpayer disputed that the embezzled money should not qualify as taxable income as the funds were already required to be returned. James used a previous decision from Commissioner of Internal Revenue v. Wilcox to show that the money was not taxable as he had “no claim of right” to the money because he no longer had possession of it. The court held that all income was to be taxed The court ultimately overturned the Wilcox case and ruled that the money was to be included in gross income because both legal and illegal earnings that are) acquired without the consensual recognition of an obligation to repay, are fully taxable. James was required to face legal penalties of three years in jail for his attempt at evading taxes in addition to the tax penalties of the crime. ISSUE: The issue being litigated in this case is whether embezzled funds should be a part of the embezzler’s gross income regardless of a repayment obligation. HOLDING: The Supreme Court ruled in agreement with the lower court’s decision and held that the defendant’s embezzled earnings were to be included on his tax return as gross income. LEGAL ANALYSIS: This ruling was supported by §61 of the Internal Revenue Code......
...controlled. An exception to tax-free treatment is contained in §357(c), which generally provides that a transferor in a §351 transaction recognizes gain to the extent that any liabilities assumed by the corporation on the transfer exceed the transferor’s aggregate adjusted basis in the assets transferred. Joe plan to contribute a parcel of land to J co. having a fair market value of $1.5 million and a basis of $350,000. Further, the land is subject to a mortgage of $1.2 million. The liability assumed by the corporate transferee ($1.2 million) would exceed the adjusted basis of the transferor's property ($350,000) by the amount of $850,000, which amount, under §357(c), must be recognized as gain to petitioners. In order to avoid this result in the present case, Joe executed a personal promissory note ($850,000) to their wholly owned corporation in an amount equal to the excess of liabilities transferred over the adjusted basis of the transferred assets. Joe claims this note will have a basis equal to its face value thus eliminating the gain caused by §357(c). 2. The major controversy in this case is the determination of the note’s basis. § 1012 provides that the basis of property is its cost except as otherwise provided in the Code. In the case of Peracchi v. Comm'r (98-1 U.S. Tax Court No. 50374), The Ninth Circuit held that Peracchi incurred cost in issuing his note because the note was enforceable by company’s creditors. However, numerous cases have held that if a......
...COMMISSIONER OF INTERNAL REVENUE. Case Information: Code Sec(s):	| | Court Name: | U.S. Court of Appeals, Ninth Circuit. | Docket No.: | No. 5602. | Date Decided: | 02/25/1929 | Disposition: | | Cites: | 7 AFTR 8508, 30 F2d 898.	| HEADNOTE . Reference(s): OPINION Warren Olney, Jr., J. M. Mannon, Jr., Henry D. Costigan, and Robert L. Lipman, all of San Francisco, Cal., for petitioner. Mabel Walker Willebrandt, Asst. Atty. Gen., and Sewall Key and Millar E. McGilchrist, Sp. Asst. Attys. Gen. (C. M. Charest, Gen. Counsel, and Prew Savoy, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for respondent. Appeal from the United States Board of Tax Appeals. Petition by Guy C. Earl, for review of a decision of the Board of Tax Appeals, sustaining an order of the Commissioner of Internal Revenue, determining that there was a deficiency in income tax paid by the petitioner for the years 1912 and 1921. Reversed. Before RUDKIN and DIETRICH, Circuit Judges, and BEAN, District Judge. Judge: BEAN, District Judge. This is a petition for review of a decision of the Board of Tax Appeals. Section 1001, Revenue Act of 1926; 26 USCA § 1224. The petitioner is, and was during the times hereinafter mentioned, a married man domiciled in the state of California. In 1920 and 1921, the years here involved, he earned for personal services the sums of $24,839.00 and $22,946.20. He and his wife made separate income tax returns for......
...SUBJECT: Business Tax, Outcome 1, Ali Case study. Income Tax Legislation. Income tax legislation can be found in the Income Tax (Earnings and Pensions) Act 2003, the Income Tax (Trading and Other Income) Act 2005 and the Income Tax Act 2007. Taxable supplies. A good understanding of the principles of VAT is very important in advising business. The third largest source of government revenues is value added tax (VAT), charged at 20% on supplies of goods and services. It is therefore a tax on consumer expenditure. Certain goods and services are exempt from VAT, and others are subject to VAT at a lower rate of 5% (the reduced rate, such as domestic gas supplies) or 0% ("zero-rated", such as most food and children's clothing). Exemptions are intended to relieve the tax burden on essentials while placing the full tax on luxuries, but disputes based on fine distinctions arise, such as the notorious "Jaffa Cake Case" which hinged on whether Jaffa Cakes were classed as (zero-rated) cakes—as was eventually decided—or (fully taxed) chocolate-covered biscuits. Five things to remember about exempt supplies: •	You don’t include VAT in the price of exempt goods or services; •	You are not eligible to claim input tax credits in acquiring exempt supplies; •	You don’t include the value of the exempt supplies in your taxable turnover when establishing your VAT registration threshold; •	If you only supply exempt goods or services, you cannot register for VAT......
...Form Department of the Treasury Internal Revenue Service A Check if: 1a Consolidated return (attach Form 851) . b Life/nonlife consolidated return . . . 2 Personal holding co. (attach Sch. PH) . . 1120 U.S. Corporation Income Tax Return For calendar year 2011 or tax year beginning Name OMB No. 1545-0123 , 2011, ending , 20 See separate instructions. 2011 Falcon Machinery Corp. B Employer identification number TYPE OR PRINT 35-0816302 C Date incorporated Number, street, and room or suite no. If a P.O. box, see instructions. 271 East Beaumont Street City or town, state, and ZIP code 07/01/1998 D Total assets (see instructions) 3 Personal service corp. (see instructions) . . 4 Schedule M-3 attached Chicago, Illinois 60612 E Check if: (1) Initial return (2) Final return (3) Name change $ (4) Address change 1a b c d e Income Merchant card and third-party payments. For 2011, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1a 1b 1c 1d . . . . . . . . . . . . . Gross receipts or sales not reported on line 1a (see instructions) . . Total. Add lines 1a and 1b . . . . . . . . . . . . . Returns and allowances plus any other adjustments (see instructions) Subtract line 1d from line 1c . . . . . . . . . . . Cost of goods sold from Form 1125-A, line 8 (attach Form 1125-A) Gross profit. Subtract line 2 from line 1e . . . . . . . .......
...0 tax amnesties generate revenue D that the tax authorities would not otherwise collect? Will tax amnesties pro- vide continuing or long-run revenue gains not available from enhanced enforcement alone? And if a change in tax enforce- ment is to occur, in what sense is an am- nesty appropriate in the transition to the new regime? Although twenty-six states have conducted tax amnesty programs since 1982, there has been little analysis of them to date, and almost none based on actual amnesty results.' In this paper we examine individual participation in am- nesties, both from the point of view of what economic analysis would lead us to expect and on the basis of evidence from actual amnesty programs. The empirical analy- sis is based on detailed information gath- ered on a random sample of taxpayers participating in the Michigan amnesty, and on fragmentary evidence we have been *Michigan State University, East Iiming, MI 48824 able to gather on amnesties in other states. In our view, information about the types of taxpayers (or nontaxpayers) who par- ticipate in amnesties and the circum- stances that lead them to participate can be of considerable use in evaluating the effects of amnesties and for predicting the prospects for a federal tax amnesty from the state results. Under a tax amnesty, taxpayers are of- fered an opportunity to come forward dur- ing a specified period of time and pay pre- I 15 unpaid taxes. The carrot viousiy encouraging participation is usually......
...MEMO TO:	Act490 students DATE:	September 8, 2015 RE:	Research Assignment (Fall 2015) Below are three tax research problems. You must complete two of the three research problems. Your analysis must be emailed to me no later than November 30, 2015. Completion of the problems makes up 50% of your internship grade. You must use the RIA Checkpoint database and correctly cite information from the Internal Revenue Code, Regulations, and tax court cases to support your conclusions. http://library.csuohio.edu/research/databases/index.html RESEARCH PROBLEM #1 Tranquility Funeral Home, Inc., your client, is an accrual basis taxpayer that sells preneed funeral contracts. Under these contracts, the customer pays in advance for goods and services provided at the contract beneficiary’s death. These payments are refundable at the contract purchaser’s request, pursuant to state law, anytime until the goods and services are furnished. Tranquility, consistent with its financial accounting reporting, includes the payments in income for the year the funeral service is provided. The IRS agent insists that the payments be prepaid income subject to tax in the year of receipt. Write a letter to Tranquility that contains your advice about how the issue should be resolved. The client’s address is 400 Rock Street, Memphis, TN 38152. RESEARCH PROBLEM #2 Esther owns a large home on the East Coast. Her home is surrounded by large, mature oak trees that......
...Individual Case Individual Case 1 Facts: Mame Green is the owner and operator of the sole proprietorship Green Haven hotel in St. Simons, Georgia. At the beginning of the 2015 tax year, the hotel had a fair market value of $3,000,000 and an adjusted basis of $1,500,000, the hotel furniture and other furnishings had a fair market value of $1,000,000 and an adjusted basis of $100,000, and the hotel had a fair market value of $5,000,000 and an adjusted basis of $3,000,000. Three months ago, Green Haven was completely destroyed by a fair. Green Haven was covered under a fire insurance policy, and as a result, Mame received $4,000,000 after settling the claim. $3,000,000 was allocated to the building and $1,000,000 for the loss of furniture and equipment. Using the $4,000,000, Mame plans to use $3,150,000 to build a smaller hotel on the same land Green Haven was located and $350,000 to purchase hotel furniture and furnishings. Mame plans to use the remaining $500,000 from the proceeds to invest in undeveloped beach property on the other side of the island. The hotel is expected to be completed in 2 ½ years. Issue: 1. Does Mame have to recognize any gain on his $500,000 purchase on undeveloped beach property, and if so, what will the character be? 2. Will Mame have to recognize any gain on the construction of the hotel building or purchase of the replacement furniture and furnshings? Authorities Issue 1 IRC Sec. 1033(a)(2)(A) IRC Sec. 1231(a)(3)(A)(ii) Rev.......
...incurred within any consecutive 30-day period after the day such goods and effects are moved from the taxpayer’s former residence and prior to delivery at the taxpayer’s new residence.” Assuming Helen moved into her Portland residence within 30 days of the start of the move, the storage costs would be deductible because they would be classified as “in-transit storage” costs. PLR 7826079 also provides guidance in that the taxpayer was allowed deductions for his in-transit storage costs while moving to a new residence for employment. Issue and Conclusion 5 Can Helen deduct the expenses of moving her children from Spain? Helen’s expenses for moving her children to Portland will not be deductible Analysis 5 §217(b)(2) states: “In the case of any individual other than the taxpayer, expenses referred to in paragraph (1) shall be taken into account only if such individual has both the former residence and the new residence as his principle place of abode and is a member of the taxpayer’s household.” Because the children are moving to Portland from Spain, Helen cannot deduct their expenses on her return. Also, in Paguio TC Memo 1981-2, the moving expense deduction for the taxpayer moving his children from the Philippines to the U.S. was denied. Issue and Conclusion 6 Can the costs of lodging in hotels in San Francisco before traveling to Portland and Portland after traveling be deducted? The costs of lodging for one day after the former residence are......
...Problem 1: If Robin corp distributed dividend to Nancy,she will report the dividend income on her tax return. Thus the income that has already been taxed at the corporate level is also taxed at the shareholder level.If Robin distributes $100000 of dividend to Nancy and assuming Nancy has no other income sources,her taxable income will be $ 90,500 (100000-5800-3700).She pays tax at the preferential rate applicable to dividends received by individuals.Her tax is $ 13575. Dividend distributions are not deductible by corporations, but corporate shareholders are entitled to dividend received deduction and shareholder can apply preferencial tax rate on constructive dividend. Paying $ 100000 as a salary would get the corporation deduction in contrast if corp pays dividend it won’t get the deduction for the same. If Nancy receives $ 100000 as salary she will have to pay tax of $ 35000,instead if she receive $ 100000 as dividend she will be taxed at preferential tax rate of 15 %. So it is beneficial for Nancy to receive dividend. From Robin corporation point of view dividend distributions are not deductible so they will have to pay tax of $ 35000 . If Robin pays $ 100000 as salary, they are entitle for deduction. Problem 2: Section 351 provides that gain or loss is not recognized upon the transfer of property to a corporation solely in exchange for stock,however if taxpayer receives property other than stock (i.e. cash or boot) from corp,realized gain is recognized. For......
...June 3, 2016 Renee Harding 123 Dog Lane Raleigh, NC 27695 Dear Renee, I appreciate the opportunity to advise you regarding the tax treatment for your loss of $25,406 in 2015 from your dog breeding activities. I understand that you decided to start breeding purebred terriers to keep yourself busy after your divorce with your husband in January. There are two possible ways to treat the loss under rulings in the Internal Revenue Code. One option is to treat your dog breeding activity as a business and deduct the losses on Schedule C, Profit or Loss from Business, of your individual income tax return. The second option is to treat your dog breeding as an activity not engaged in for profit, which does not allow you to deduct the losses on your tax return because dog breeding would be considered a hobby. Based on my research, and after considering the previously stated alternatives, my recommendation for the tax treatment for your loss is to treat your dog breeding as an activity not engaged in for profit. To ensure we have a complete understanding, I am stating the facts and relevant information that you have provided to me. If these facts are incomplete or incorrect, please let me know. You received a property settlement that included the house and adjoining office on five acres of land. However, your daughter uses two-thirds of the office and the land. You also receive an annual alimony allowance that allows you to live comfortably without working. To keep yourself...
...Chapter 5 Research Case 98 MEMORANDUM Date:	July 12, 2012 From:	Kathryn Baker To:	Teddy Chow (“Taxpayer’s) Tax File Regarding:	Federal Income Tax Consequences of damages awarded to the Taxpayer after Taxpayer was injured in an auto accident. I. Relevant Facts: The taxpayer filed a lawsuit to recover damages for personal injuries sustained in a 2000 auto accident. In 2004, a jury awarded the taxpayer $1,620,000. In addition, delay damages in the amount of $1,080,000 were then added to that award, resulting in a total judgment of $2,700,000. The defendants appealed the award, and while the appeal was pending, the parties reached a settlement, which provided for payment to Teddy of $2,550,000. In 2009, after attorney’s fees of $850,000 were subtracted, Teddy received $1,700,000. II. Issue: 1. How are the damages treated for tax purposes? 2. Is the attorney’s fee deductible? III. Relevant Authorities: A. Compensation for Injury or Sickness Internal Revenue Code (“IRC”) Sec. 104(a) provides the general rule that- Except in the case of amounts attributable to (and not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for any prior taxable year, gross income does not include that--- IRC Sec. 104 (a)(2) the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments)......
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