Definitions (5Pt Each) NOTE: in order to get full marks, you need to define things in your own words (i.e. just copying the textbook is not sufficient) and you also need to explain why this could be a good source for assisting a client.

a. Tax Code

b. IRS Regulation

c. Revenue Ruling

d. Revenue Procedure

e. Private Letter Ruling

f. Technical Advice Memorandum

g. IRS Notices

h. Committee Reports for the Senate or House of Representatives Problems:

2. Olek is looking to start a business after immigrating to the United States two years ago and completing his MBA. His business is going to import and distribute Ukrainian caviar. As a part of this business, he will own a warehouse near the port where the caviar will enter the United States. Second, he will have sales agents, who travel around the US selling his caviar. What kind of taxes is he likely to experience as he starts and runs his business? (10Pts).

3. You are at a cocktail party and one of the party participants of the party states they “I pay 37% of my money to the federal government.” He then goes on to complain how nothing works well and all of this money gets wasted in useless programs. (Assume the participant is married and files joint but makes 650,000 of taxable income). Is the participant correct? Does the participant pay 37% of their income in taxes? If so, explain why and if not, explain why not? (10Pts).

4. Explain the tax return appeals and litigation process. Assume the IRS has already selected the return for processing. What happens next? Take the process all through the potential court options. In order to get full marks on this question, you will not only need to state the steps, but you will also have to explain what each step is in detail (10pts).

5. What are the advantages and disadvantages of the three different courts a taxpayer can use when the audit process is concluded? (10Pts).

6. Compare and contrast Circular 230 and the AICPA Statement on Standards for Tax Services (15Pts).

7. State and define (including code sections) the three types of taxpayer penalties for filing late and paying late. (Note: this is NOT the underwithholding penalty) (10Pts).

8. During the year, you go out an purchase a lottery ticket and you win $100,000 a. How is this going to be taxed? (5Pts) b. What is a potential deduction against these winnings and what is the limit of these winnings? (5Pts)

9. Mike and Marta met and fell in love in 2015. In 2016, they got married. Mike is a lawyer with a local law firm. Marta is local flower shop owner after immigrating from Croatia right before going to a university for her college education in 2010. In 2017 and 2018 they filed a married, filing joint return and in 2019, they had an irreconcilable difference, thus they filed a separate return. In 2020, they were divorced and filed separate tax returns.

In 2020, the IRS sent Mike and Marta a notice that they were to report to the IRS office for an office examination of their 2018 tax return and Marta’s 2019 tax return. After the examination, it was determined that Marta’s depreciation was not calculated correctly and as a result, there is an additional tax due for 2018 and 2019 of $10,000 for 2018 and $13,000 for 2019. After the IRS determines the amount of tax due, Marta decides to leave the US and immigrate to a third country, which has no extradition order, where after arriving, she surrenders her Green Card to the Embassy in the host nation.

The IRS wants to take action against Marta, but she is gone. What action can the IRS take to get the money that is owed to it for each year (2018 and 2019) against Mike? (15Pts).

9. You have a client (Jessica) is married, whose husband stays at home and goes to school. Jessica makes $150,000 per year income before adjustments, but she is not subject to a retirement plan. During the year, they suffered a bout of cancer and had to go to the hospital. While the boss was willing to keep paying them, because Jessica used alternative treatments, the insurance company was not willing to pay for the treatment.

a. Absent another consideration for adjustments, what is the medical deduction allowed on Schedule A? (5Pts).

b. What is the income limit for Jessica to contribute to a Traditional IRA? (5Pts)

c: if you were to recommend Jessica to make a Traditional IRA contribution, how will this change the medical deduction you provided in the answer for a. of this question? (5Pts)

10.. Robert and Diana are married and usually file a joint tax return. They each have the following income items.

a) Robert, who is a controller of a company – W-2 Wages: 250,000. He is covered under a retirement plan at his work.

b) Diana, who is an owner of two businesses. She is not covered by a retirement plan.

a. An art studio, who produces art works for sale in their studio and offer paid tours of their art studio

i. Gross Income – $150,000

ii. Expenses – $180,000

b. Design consultant, where she works to design office space for professional spaces (lawyers, accountants, engineers, doctors, etc).

i. Gross Income – $120,000

ii. Expenses – $7,500

c) Other Income:

a. Interest Received: $400

b. Dividends Received: $1,500

c. Veteran’s income for a military disability for Diana: $14,000

d) They have the following deductions:

a. Taxes:

i. Income Taxes withheld: $15,000

ii. Income Taxes paid quarterly for Diana: $10,000

iii. Real Property Taxes: $7,500

iv. Personal Property Taxes: $1,200

b. Interest Paid

i. Interest on home: $22,000

ii. Interest paid on investment in land: $4,000

c. Charitable Contributions:

i. American Red Cross: $1500

ii. United Way: $1200

iii. George Mason Alumni Association: $2500

e) In addition to the above part, they have 2 children. One is age 5 and one is 14, as of the end of the year.

List of questions below:

1. What is the business income to be reported on each Schedule C and then reported on the Schedule 1 of the tax return?

a. Schedule C (3Pts):

b. Schedule C (3Pts):

c. Schedule 1 (3Pts):

d. Which line on Schedule 1 is where Schedule C income gets to be reported (3Pts):

2. Other income:

a. Where is the interest reported initially (3Pts):

b. Where are the dividends reported initially (3Pts):

c. Where is the VA disability reported on the tax return (3Pts):

3. What is the total income to be reported on Schedule 1 before any adjustments (3Pts):

4. Calculate the total deductions allowed on Schedule A? Break it out by category:

a. Taxes (3Pts):

b. Interest Paid (3Pts):

c. Charitable Deductions (3Pts):

5. Is it better for Robert and Diana to take itemized or the standard deduction? Please explain your answer (10Pts)? 6. What is the total taxable income for Robert and Diana (3Pts):

7. What is the total taxes owed as shown on line 16 of Form 1040? (3Pts):

8. Is Diana subject to the Self-Employment tax?

a. If so, where is it reported? (3Pts)

b. What is the self-employment tax rate for the following taxes?

i. Social Security (3Pts):

ii. Medicare (3Pts):

9. Does the Self-Employment tax offer a tax deduction? If so, where is it reported? If not, why not? 

Answer rating: 100% (QA)

Q1 Answer a Tax Code A tax code is a federal government document usually numbering thousands of pages that details the rules individuals and businesses must follow in remitting a percentage of their i... View the full answer