Question & Answer

Maurice has a client that recently asked him about the odds of the IRS detecting cash transactions not reported on a tax return.  What are some of the issues that Maurice should discuss with his client?

Sasha owes additional tax imposed in a recent audit.  In addition to the tax, will they be assessed other amounts?  If so, how will these amounts be determined?

Using the same facts from the previous problem, how would your answer change if Randy estimates that there is only a 20 percent chance that the position will be sustained upon audit or judicial proceeding?  

Randy has found conflicting authorities that address a research question for one of his clients.  The majority of the authorities provide an unfavorable answer for his client.  According to Randy’s estimates, if the client takes the more favorable position on its tax return, then there is approximately a 48 percent chance that the position will be sustained upon audit or judicial proceeding.  If the client takes this position on its tax return, will Randy be subject to penalty?  Will the client potentially be subject to penalty?

Benjamin, a self-employed bookkeeper, takes a CPA review course ($3,000 cost) to help prepare for the CPA exam. 

a. Use an available tax research service to determine if Benjamin may deduct the cost of the CPA exam course.

b. Write a memo communicating the results of your research.

Latrell recently used his Delta Skymiles to purchase a free round-trip ticket to Milan, Italy (value $1,200).  The frequent flyer miles used to purchase the ticket were generated from Latrell’s business travel as a CPA.  Latrell’s employer paid for his business trips, and he was not taxed on the travel reimbursement.  

a.  Use an available tax research service to determine how much income, if any, Latrell will have to recognize as a result of purchasing an airline ticket with Skymiles earned from business travel.

b.  Write a memo communicating the results of your research.

Omar is a huge college football fan.  In the past, he has always bought football tickets on the street from ticket scalpers.  This year, he decided to join the university’s ticket program, which requires a $2,000 contribution to the university for the “right” to purchase tickets.  Omar will then pay $400 per season ticket.  Omar understands that the price paid for the season tickets is not tax deductible as a charitable contribution.  However, contributions to a university are typically tax deductible.  

a.  Use an available tax service to determine how much, if any, of Omar’s $2,000 contribution for the right to purchase tickets is tax deductible.

b. Write a letter to Omar communicating the results of your research.

Janelle and Lori were divorced in 2016.  Pursuant to the divorce decree, Janelle receives $10,000 of alimony each month.  Use an available tax service to determine if the alimony Janelle receives is taxable. Would your answer change if Janelle and Lori still live together?

Paris was happy to provide a contribution to her friend Nicole’s campaign for mayor, especially after she learned that charitable contributions are tax deductible.  

a.  Use an available tax service to determine whether Paris can deduct this contribution.

b.  Write a memo communicating the results of your research.

Pierre recently received a tax penalty for failing to file a tax return.  He was upset to receive the penalty, but he was comforted by the thought that he will get a tax deduction for paying the penalty.  

a.  Use an available tax research service to determine if Pierre is correct.

b.  Write a memo communicating the results of your research.

Katie recently won a ceramic dalmatian valued at $800 on a television game show.  She questions whether this prize is taxable because it was a “gift” she won on the show.  

a.  Use an available tax research service to answer Katie’s question.

b.  Write a letter to Katie communicating the results of your research.

J.C. has been a professional gambler for many years.  They love this line of work and believe the income is tax-free.  

a.  Use an available tax research service to determine whether J.C.’s thinking is correct.  Is the answer to this question found in the Internal Revenue Code?  If not, what type of authority answers this question?

b.  Write a memo communicating the results of your research.

Sandy has determined that her research question depends upon the interpretation of the phrase “not compensated by insurance.”  What type of research question is this?

Georgette has identified a 1983 court case that appears to answer her research question.  What must she do to determine if the case still represents “current” law?

Aldina has identified conflicting authorities that address her research question.  How should she evaluate these authorities to make a conclusion?

Justine would like to clarify her understanding of a code section recently enacted by Congress.  What tax law sources are available to assist Justine?

For each of the following citations, identify the type of authority (statutory, administrative, or judicial) and explain the citation.

For each of the following citations, identify the type of authority  

  (statutory, administrative, or judicial) and explain the citation.

Jamareo has found a “favorable” authority directly on point for his tax question.  If the authority is an administrative authority, which specific type of authority would he prefer to answer his question?  Which administrative authority would he least prefer to answer his question? 

Robert has found a “favorable” authority directly on point for his tax question.  If the authority is a court case, which court would he prefer to have issued the opinion?  Which court would he least prefer to have issued the opinion?

Faith, a resident of Florida (11th Circuit), recently found a circuit court case that is favorable to her research question.  Which two circuits would she prefer to have issued the opinion?

Juanita, a Texas resident (5th Circuit), is researching a tax question and finds a 5th Circuit case ruling that is favorable and a 9th Circuit case that is unfavorable.  Which circuit case has more “authoritative weight” and why?  How would your answer change if Juanita were a Kentucky resident (6th Circuit)?

The IRS recently completed an audit of Shea’s tax return and assessed $15,000 additional tax.  Shea requested an appeals conference but was unable to settle the case at the conference.  She is contemplating which trial court to choose to hear her case.  Provide a recommendation based on the following alternative facts.

{Planning} Jackie has a corporate client that has recently received a 30-day notice from the IRS with a $100,000 tax assessment.  Her client is considering requesting an appeals conference to contest the assessment.  What factors should Jackie advise her client to consider before requesting an appeals conference?

Randy deducted a high level of itemized deductions two years ago relative to his income level.  He recently received an IRS notice requesting documentation for his itemized deductions.  What audit procedure likely identified his tax return for audit?