John Smith Tax Issues

You Decide Assignment 1. John Smith value solutions: a. How is the $300,000 treated for purposes of federal tax income? The issue is how the $300,000 will be accost for federal income tax purposes. According to the inbred Revenue computing machine code Sec. 61(a), megascopic income includes all income from whatever source derived unless specifically exempted by law. Under this code, the $300,000 is considered unwashed income since this is income earned by perform service as a part of Johns cover. b. How is the $25,000 case-hardened for purposes of federal tax income? The issue is how the $25,000 of reimbursed outlays will be do by for federal income tax purposes. According to the Internal Revenue coordinate Sec. 162, Ordinary and necessary expenses incurred to carry on a trade or business ar deductible. Since the $25,000 reimbursed expenses were in coitus to the operate provided, it will need to be include in gross income but will be treat ed as a deduction to the adjusted gross income. c. What is your inclination regarding reducing the ratable amount of income for both (a) and (b) above? The issue is determining how to cut off the ratable income for both the $300,000 and the $25,000 reimbursed expenses that are included in gross income for the real form.

Since John did not know if he were handout to win the case that he worked on for two geezerhood and therefore receive the income, he was unable to use the accretion method and had to use the capital method. In order to avoid his income for the current year, he vex up file an amen dment to his previous tax year to variegate! to use the accrual method. With this method, he can split his income and expenses between two years, effectively reducing his taxable liability for the current year. John should identify all of his expenses that were incurred during the year that were in relation to this case. He can deduct salaries expense and all move around expenses. 2. Jane Smith tax issues: a. What are the unlike tax consequences...If you indispensability to get a full essay, order it on our website: BestEssayCheap.com

If you want to get a full essay, visit our page: cheap essay