Mrs. K is a new client. She has recently divorced and has some questions regarding the payments she is receiving from her ex-husband, Mr. K. She tells you that Mr. K is 50 years old and was previously divorced from his first wife. He is a wealthy doctor. Mrs. K received $10,000 a month from Mr. K. She asks you whether she has to pay taxes on the $10,000.
a. What additional questions do you need to ask Mrs. K before you begin your research?
b. What additional potential sources of information or documents might you want to ask for?
c. Which of the preceding facts are relevant? Which are irrelevant?
d. Is there a chance that you will need to ask more questions at a later point in time? Why or why not?
e. What is the first question you will try to answer in your research? How does your initial question change when you discover in your research that if the $10,000 is considered "alimony," it must be included in Mrs. K's taxable income. You also learn that any amounts that are considered "child support" will not be taxable to Mrs. K. Please comment.
f. What do you believe is the taxpayer's desired result? Why is this important? How does it affect your role as tax advisor?
g. Is this a planning research type of situation? How do you know?
h. What if, instead of $10,000, the monthly amount Mrs. K receives from Mr. K totals $100. How does this affect the tax research?