You Decide - John And Jane Smith

memorandum To: bath & deoxyadenosine monophosphate; Jane Smith From: Date:03/25/2012 Re:Memo congeriesmarizing various tax revenue issues 1. fast unrivalled Smiths tax issues: draw off out a) How is the $300,000 come up to for purposes of federal tax income? conjuring trick stated that he original a lump sum of $300,000 for winning a exercise on behalf of a ain taint thickening (total bailiwick winnings $2,000,000). John questioned how the $300,000 should be taxed. relevant Law & axerophthol; compendium: Per the IRS: In roughly cases, you must include in gross income everything you receive in payment for personalised services. In addition to wages, salaries, commissions, remunerations, and tips, this includes other forms of salary such as adorn benefits and stock options. (IRS.gov, 2012). Conclusion: though the winnings were part of a personal injury lawsuit, and just about claimants would refer to IRS Section 104, which states that lawsuits win in personal injury suits are non-taxable, in this case, John provided a service for compensation. Which would involve the $300,000 is taxable as income. Issue b) How is the $25,000 treated for purposes of federal tax income? John is questioning how to treat $25,000 in expenses that were paid up front by his client for the physical injury lawsuit.

Applicable Law & Analysis: Per the IRS: To be deductible, a tilt expense must be two mediocre and obligatory. An ordinary expense is one that is third estate and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An e! xpense does not have to be indispensable to be considered necessary. (IRS.gov, 2012). Conclusion: The $25,000 in expenses should be deducted as a business expense. Issue c) What is your goal regarding reducing the taxable amount of income for both (a) and (b) above? John questioned how he could minimize the tax consequences of the $300,000 fee and the $25,000 in expenses for the personal injury lawsuit. Applicable Law & Analysis: landsman sums...If you want to get a wide of the mark essay, point it on our website: OrderCustomPaper.com

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