Memo For Tax Research On Three Tax Issues - Essay.

Issue 1: Bad Debt Deduction

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This paper addresses the three tax issues that encounter in the situation. This paper describes the all three tax issues separately and explains the steps of covering in the research process for each issue on the basis of the law. This paper evaluates the all three tax issues and explains the tax liabilities of related person or firm in the given case while consider the law of the country. This paper presents all the facts related to tax issues and then describes the tax liability of related person or firm with describes the application of law in the each issue.

Issues 1: Steve Swell did not mentioned jewel that he received in behalf of debt in his 2014 tax return.

Analysis: Steve Swell is a CPA/APFS that is operated a personal financial analysis planning practices as a sole proprietorship. He did not have any employees, but it was successful with a variety of affluent client.  In 2014, Steve close friend personal friend, Billie Blaze faced financial difficulty. So, Billie asked Steve to prepare a comprehensive personal financial plan that might provide a way back to salvage. Steve completed the comprehensive financial plan in late January and billed Billie for $7000 on the basis of the standard billing rate for this time. Unfortunately the financial plan did not work or help Billie, so he was unable to pay Steve bill. Later Billie was concerned about the Steve debt and it was possibility that she may fill bankruptcy soon. In April, she offer of a small bag of loose jewels of Steve in settlement of the debt, so Steve accepted her offered immediately without concern value of jewels. Steve forgot about the jewels until March 2015 while he was preparing his 2014 tax return and the bed debt came to mind. As his request, a jeweller/client appraised the stones value of $8000 that means Steve recovered its full debt from Billie.

Applicable Law: 26 CFR 1.381(c) (12)-1- Recovery of bad debts, prior taxes, or delinquency amounts.

The rule prescribed by paragraph (a) (1) of this section and by section 381(c) (12) with respect to bad debts, prior taxes, and delinquency amounts applies equally with respect to the recovery by the acquiring corporation of all other losses, expenditures, and accruals made on the basis of deductions from the gross income of a distributor, sole proprietorship or corporation for prior taxable years, in section 127 of the Internal Revenue Code of 1939 (Internal Revenue Service, 2015). For the year of any recovery by the acquiring corporation, the amount of the recovery exclusion for the original taxable year shall be determined in accordance with paragraph (b) of § 1.111-1, so Steve included amount of jewel in his 2014 tax return.

Issue 2: Ashley include the total cost of the summer camp including transportation in arriving at her total qualified expenses to determine her dependent care credit for the year.

Analysis: Ashley MacAurther is a single woman that is employed in a big city as a CPA. Ashley never works on weekends and her 65-hour-oer weak schedule continues year round. Ashley relies on the Happy Camper Day Care Center to provide care for her 11-year-old dependent son, josh and paid Center of $100 per week of these services cost. During the summer, Centre is not operated that created issues of Ashley to proper care for Josh, so she sent Josh to summer camp in Canada for eight weeks. The cost was for lodging, meal and a fee for all activities in a number of outdoor sports are $2500. The other cost was round trip airfare of $450.

Applicable Law: Publication 503 (2014), Child and Dependent Care Expense

Ashley to be able to claim the credit for child and dependent care expenses, she must file Form 1040, Form 1040A, or Form 1040NR, not Form 1040EZ or Form 1040NR-EZ (Internal Revenue Service, 2015)..

Issue 3: Expenses on “uniform” and match outfits deductible by Judy.

Analysis: Judy taxpayer is an airline attendant for Safe Air. As per the company requirement, her need to wear a “uniform” of a specific type of bright yellow shorts and top that she must purchase from a particular department store. The below table indicates the items and their cost that Judy purchase to match the outfits. The clothes are suitable for dry cleaning only.

Applicable Law: Publication 529 (2014), Miscellaneous Deductions

Work clothes and uniforms, work-related clothing, laundry and dry-cleaning expenses if required for everyday use can deduct certain expenses by Judy as miscellaneous itemized deductions on Schedule A (Form 1040 or Form 1040NR) (Internal Revenue Service, 2015).

References

Internal Revenue Service. (2015). Topic 453 - Bad Debt Deduction. Retrieved from: https://www.irs.gov/taxtopics/tc453.html

Internal Revenue Service. (2015). Publication 503 - Main Content. Retrieved from: https://www.irs.gov/publications/p503/ar02.html

Internal Revenue Service. (2015). Publication 529 - Main Content. Retrieved from: https://www.irs.gov/publications/p529/ar02.html