...in a §351 transfer, avoids §357(c) gain recognition? Can he increase the basis of the assets by transferring his own promissory note to the corporation? Conclusion 1. Joe received stock valued at $300,000 and thus realized a gain of $1,150,000 ($300,000+$1,200,000-$350,000). §357(c) requires Joe recognize a gain of $850,000 ($1,200,000-$$350,000). 2. It depends on whether Joe’s note has a basis in Joe’s hands for purpose of section §357(c). Analysis 1. Under §357(c), no gain or loss is if property is transferred to a corporation solely in exchange for stock of that corporation if, immediately upon the transfer, the transferors are in control of the corporation. Joe transferred land to a corporation he 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...
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...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. Rul...
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... Facts: In April of 2015, Elizabeth filed a joint tax return with her husband Gary. Both spouses are 67 years old and have no dependents. After filing their tax return, Elizabeth realized that Gary has 500,000 of embezzled funds in a bank account that she was unaware of. Although the embezzled funds earned $25,000 of interest, they were not reported on the couple’s 2014 tax return. The following income and deductions were reported on the tax return. Gross Income $295,000 Deductions for AGI $8,500 Itemized Deductions $13,700 Issues: 1) What is the couple’s taxable income and liability using the amounts reported on the tax return? 2) What is the taxable income and liability including the interest income from the embezzled funds? 3) What is the taxable income and liability including the interest income from the embezzled funds and the funds itself? 4) Based on the Internal Revenue Code, what amount of taxable income and liability is correct for reporting purposes? 5) Will Elizabeth receive relief from the liability of not reporting the correct amount of income under “Innocent Spouse” rules? Authorities: Reg. § 1.6015-2 Rev. Rul. 61-185, 1961-2 CB 9, IRC Sec. 61 Conclusion: 1) Taxable Income for the couple is $263,800 and tax liability is $62,958.50. 2) Taxable income for the couple, including interest from embezzled funds, is $289,274 and tax liability is $71,364.92. The additional tax cost will be $8,406.42. 3) Taxable income for the...
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...Chapter C:1 Tax Research Learning Objectives After studying this chapter, the student should be able to: 1. Distinguish between closed fact and open fact tax situations. 2. Describe the steps in the tax research process. 3. Explain how the facts influence tax consequences. 4. Identify the sources of tax law and assess the authoritative value of each. 5. Consult tax services to research an issue. 6. Apply the basics of Internet-based tax research. 7. Use the citator to assess authorities. 8. Describe professional guidelines that CPAs in tax practice should follow. 9. Prepare work papers and communicate to clients. Areas of Greater Significance Since this will usually be a student’s first exposure to tax research, the importance of the facts to the tax results, federal tax services and the citator should be discussed. The widespread use of Internet-based databases for tax research makes this means of tax research much more important. An effort should be made to introduce Internet-based searches to the students if at all possible. The text discusses two types of professional guidelines for CPAs in tax practice. Areas of Lesser Significance In the interest of time, the following areas may be omitted: Sample work papers and client letter (Appendix A). Problem Areas for Students The following areas may prove especially difficult to students: ...
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...“DIRECT TAX” ] [Amendments vide Finance Act,2010 are applicable for June 2011 and December 2011 terms of Examination] AMENDMENTS vide FINANCE ACT, 2010 on “DIRECT TAX” Tax Rates Rates of Income - Tax for Assessment Year 2011-12 1.1 (A) For woman, resident in India and below the age of 65 years at any time during the previous. Upto Rs. 1,90,000 Rs. 1,90,001 to Rs. 5,00,000 Rs. 5,00,001 to Rs. 8,00,000 Above Rs. 8,00,000 Nil 10% 20% 30% 1.1 (B) For an individual (man or woman), resident in India who is of the age of 65 years or more at any time during the previous year. Upto Rs. 2,40,000 Rs. 2,40,001 to Rs. 5,00,000 Rs. 5,00,001 to Rs. 8,00,000 Above Rs. 8,00,000 Upto Rs. 1,60,000 Rs. 1,60,001 to Rs. 5,00,000 Rs. 5,00,001 to Rs. 8,00,000 Above Rs. 8,00,000 Surcharge: NIL Education Cess (EC): Education Cess at the rate of 2% on income-tax shall be levied. Secondary and Higher Education Cess (SHEC): “Secondary and Higher Cess (SHEC) on income-tax: at the rate of 1% of income-tax in all cases shall be levied. Nil 10% 20% 30% Nil 10% 20% 30% 1.1 (C) Individuals, [other than those mentioned in para 1.1(A) and (B) above] HUF, AOP/BOI (other than co-operative societies, whether incorporated or not) Directorate of Studies, The Institute of Cost & Works Accountants of India Page 2 AMENDMENTS vide FINANCE ACT, 2010 on “DIRECT TAX” 2. Other Assessees: Assessee Rate of Tax 30% Education SHEC Surcharge Cess 2% on income 1% on income 7.5% of income tax, if Net tax tax Income...
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...Research objectives The purpose of this thesis is to test whether Mauritius is truly a platform for tax evasion and to what extent the measures that are being taken by the Government to combat this bad publicity are effective. The specific objectives of this study are: To understand the purpose and functioning of treaty arrangements Mauritius has with other countries throughout the world. To test the effectiveness of the measures to combat tax evasion. To test the knowledge of employees in the global business sector. Research questions To what extent employees understand the tax regime for global companies? Based on their experience, how complicated do they perceive the tax regime to be? Do they believe that Mauritius is a tax...
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...|Topic in Mastery of the |Chapter 3 - Building Your |Chapter 4 – Brain Teasers: Using|Chapter 5 – Cases to Accompany | |Financial Accounting Research |Business Vocabulary: Defining |FARS to Untangle the Mystery |FARS [Related Assignments at End| |System (FARS) Through Cases 2nd |Terms and Solving Problems |[See Introduction and Example |of Cases] | |Edition by Wallace [Chapter 1 |Through FARS [See Introduction |pp. 4-1 to 4-7] | | |and 2 where noted] |and Example pp. 3-1 to 3-7] | | | |FASB, Standard Setting; GAAP; |Table 3.1 Accounting Standards; |1: How Many Standards Have Been |Case 12: Emerging Issues: The | |Governance; FARS [Chapter 1 – |Table 3.39 Regulated Industry; |Issued by FASB?; 2: Dissents |Agenda of FASB; [Case 8 Related:| |The Financial Accounting |Table 3.40 Specialized Industry |Portending Future?; 32: What |Does It Matter Where Guidance Is| |Research System (FARS) Primer.] |Considerations |Makes One GAAP Preferable to |Located?]; [Case 12 Related: Are| | | |Another?; 30: When Can Analogies|Accounting Rules to Blame?] | | | |Be Used?; 31: What Are the 10 | | | ...
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...ACC 565 WEEK 5 MIDTERM EXAM 1) Tax planning is not an integral part of open-fact situations. 2) The Internal Revenue Code of 1986 contains the current version of the tax law. 3) Regulations issued prior to the latest tax legislation dealing with a specific Code section are still effective to the extent they do not conflict with the provisions in the new legislation. 4) Final regulations have almost the same legislative weight as the IRC. 5) A revenue ruling is issued by the Internal Revenue Service only in response to a verbal inquiry by a taxpayer. 6) Taxpayers must pay the disputed tax prior to filing a case with the Tax Court. 7) Appeals from the U.S. Tax Court are to the Court of Appeals for the Federal Circuit. 8) Appeals from the Court of Appeals go to the Supreme Court under a writ of certiorari. The Supreme Court decides whether or not they will hear the case. 9) A citator enables tax researchers to locate authorities (e.g., cases and IRS pronouncements) that have cited a particular case. 10) According to the Statements on Standards for Tax Services, CPAs must verify all tax return information submitted by reviewing client documentation. 11) When a taxpayer contacts a tax advisor requesting advice as to the most advantageous way to dispose of a stock, the tax advisor is faced with A) a restricted-fact situation. B) a closed-fact situation. C) an open-fact situation. D) a recognized-fact situation. 12) Investigation of a tax problem that involves a closed-fact...
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...or service, in general, goes through several stages before the final product or service reaches the consumer. To illustrate, if the production and distribution process is divided into three basic stages of manufacturing, wholesaling and retailing, value is added at each stage through further processing, packing or other improvements before it reaches the consumer via the retailer. The GST is a tax on the value added to the output or service at each stage of the process. In its generic form, the GST is a value-added tax (VAT). These terms are used interchangeably in this note. A multi-stage tax like the GST protects tax collections through two built-in features. First, the multi-point collection and invoice trail minimizes tax avoidance and tax evasion. This is because the need to issue and obtain invoices to claim tax deductions for taxes imbedded in inputs from a previous stage of the production chain fosters greater compliance. Second, the GST is better able to protect revenue from tax evasion by retailers as compared to a single-stage sales tax imposed solely at the retail sales tax (RST). This feature, however, comes with greater administrative and compliance costs. 1.2 Problem Statement The introduction of GST in Malaysia has called for many arguments from various parties including academics, professionals and the citizens (the potential GST payers) on how GST affects the operating cost of business. The government tried to convince Malaysians that the GST will not...
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...CHAPTER 1 UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW SOLUTIONS TO PROBLEM MATERIALS Question/ Problem 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Learning Objective LO 1 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 2 LO 3 Topic Revenue neutrality Controlling the economy Encouraging industries Research and development expenditures Social considerations Earned income credit Charitable contributions Fines and penalties Home ownership Higher education incentives Tax credit versus deduction Alleviating the effect of multiple taxation Double taxation and effect of a credit versus a deduction Wherewithal to pay concept: transfer to controlled corporation Avoiding the corporate income tax Wherewithal to pay: example Recognized gain versus realized gain: amount Like-kind exchange versus involuntary conversion: losses Settlement time period Installment method Keogh Plan: grace period Bracket creep: indexation Community property states Community property states Deterrence provisions $13,000 annual gift tax exclusion: audit Status: Present Edition New New New New New Unchanged Unchanged Unchanged Unchanged Unchanged Unchanged Unchanged Unchanged Modified Modified New New New New New New New New New New New Q/P in Prior Edition 6 7 8 9 10 11 12 13 14 15 Instructor: For difficulty, timing, and assessment information about each item, see p. 1-3. 1-1 © 2012 Cengage...
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...9.9 Tax Investigation Framework What is Tax Investigation Tax investigation is an inspection of taxpayer's business and / or individual books, records and documents. This inspection is to ensure the right amount of reported income and paid taxes required under laws and tax provisions. The investigation will be carried out only in cases where is suspected on the basis of precise and clear evidence that the tax payer is deliberately trying to avoid paying taxes or having committed an act of willful deceit under the Act, such as real property gains Tax Act ITA and 1976, the Petroleum(Income Tax) Act 1967, Promotion of Investment Act 1986, the Stamp Act 1949 and the Labuan Offshore Business Activity Tax Act 1990. There are two categories as follows: 1. Civil Tax Investigation Civil tax investigation activity involves detection of tax evasion. The primary concern being recovery of tax loss and imposition of heavy penalties. 2. Criminal Tax Investigation Functions and work procedures involving criminal tax investigation are similar to that of civil investigation. However with criminal investigation, it more focus on gathering admissible evidence with a view towards prosecution and conviction of the tax evader for commission of offences pursuant to ITA, Penal Code (Act 574), Criminal Procedure Code (Act 593), Evidence Act 1950 (Act 56) and other relevant Acts.(Hasil, 2007). How A Tax Investigation is carried out 1. The Visit Tax investigations conducted by the...
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...SOLUTIONS TO RESEARCH PROBLEMS Research Problem 1 Hoffman and Smith CPAs 5191 Natorp Boulevard Mason, OH 45040 March 6, 2012 Mr. Donald Dewey 4321 Mt. Vernon Road Dover, DE 19901 Dear Don: At the recent Chamber of Commerce meeting, you asked me about the tax advantages of having Van, your son, claim Debra, your daughter, as a qualifying child. If Van can treat Debra as his qualifying child, he qualifies for a dependency exemption, the child tax credit, and the earned income tax credit. On the other hand if you claim Debra, the only benefit available is a dependency exemption—your income is too high to permit the use of either the child tax credit or earned income tax credit. A dependency exemption yields a greater tax benefit to you than to Van, but the tax saving is by far outweighed by the unavailability of the two credits. Consequently, the family would save taxes if Van claims Debra as his qualifying child. In such a case, you would have to forgo the dependency exemption for Debra. Until 2009, the procedure suggested in the preceding paragraph was permissible. However, in the Emergency Economic Stabilization Act of 2008, Congress changed the rules. Under current law, another eligible taxpayer may claim a person as a qualified child only if he or she has an adjusted gross income (AGI) higher than the highest AGI of any of the person’s parents. Clearly, the new condition eliminates Van because his AGI ($16,000) is not higher than the AGI...
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...INTERIM REPORT TAX SAVING SCHEMES (ANALYSIS AND COMPARISION) ICFAI BUSINESS SCHOOL HYDERABAD MUTUAL FUNDS AT A GLANCE Mutual Fund is an instrument of investing money. Nowadays, bank rates have fallen down and are generally below the inflation rate. Therefore, keeping large amounts of money in bank is not a wise option, as in real terms the value of money decreases over a period of time. One of the options is to invest the money in stock market. But a common investor is not informed and competent enough to understand the intricacies of stock market. This is where mutual funds come to the rescue. A mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in. By pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. Also, one doesn't have to figure out which stocks or bonds to buy. But the biggest advantage of mutual funds is diversification. Diversification means spreading out money across many different types of investments. When one investment is down another might be up. Diversification of investment holdings reduces the risk tremendously. On the basis of their structure and objective, mutual funds can be classified into following major types: • Closed-end funds • Open-end...
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...CHAPTER 1 UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW SOLUTIONS TO PROBLEM MATERIALS DISCUSSION QUESTIONS 1. (LO 1) When enacting tax legislation, Congress often is guided by the concept of revenue neutrality so that any changes neither increase nor decrease the net revenues raised under the prior rules. Revenue neutrality does not mean that any one taxpayer’s tax liability remains the same. Since this liability depends upon the circumstances involved, one taxpayer’s increased tax liability could be another’s tax saving. Revenue-neutral tax reform does not reduce deficits, but at least it does not aggravate the problem. 2. (LO 2) Economic, social, equity, and political factors play a significant role in the formulation of tax laws. Furthermore, the IRS and the courts have had impacts on the evolution of tax laws. For example, control of the economy has been an important economic consideration in passing a number of laws (e.g., rapid depreciation, changes in tax rates). 3. (LO 2) The tax law encourages technological progress by allowing immediate (or accelerated) deductions and tax credits for research and development expenditures. 4. (LO 2) Saving leads to capital formation and thus makes funds available to finance home construction and industrial expansion. For example, the tax laws provide incentives to encourage savings by giving private retirement plans preferential treatment. 5. (LO 2) a. Section 1244 allows ordinary loss...
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...Recognized Courses in Accounting/Tax Research and Analysis and Accounting/Business Communications September 3, 2014 The Texas State Board of Public Accountancy requires each candidate to complete a minimum of two semester hours in accounting research and analysis or tax research and analysis from a recognized college or university. The semester hours may be obtained through a discrete course or offered through an integrated approach. If the course content is offered through integration, the college or university must advise the Board which course(s) contain the research and analysis content. Courses identified through integration must dedicate 1 semester hour, or quarter hour equivalent, to research and analysis. Courses used to meet this requirement may not be used to meet the requirement for accounting or business communications described below. Course(s) identified by a university to meet the requirements for research and analysis in accounting or taxation should primarily address the identification, organization, and integration of diverse sources of information such as authoritative literature and pronouncements, to reach a conclusion or make a decision; and should analyze accounting and taxation issues by reviewing information, using empirical data and analytical methods, recognizing data in patterned activities, forecasting, and integrating data. CPAs may be asked to conduct research and analysis when providing attest services, professional accounting...
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