You Decide - John And Jane Smith

memorandum To: bath & deoxyadenosine monophosphate; Jane Smith From: Date:03/25/2012 Re:Memo conjugationmarizing various taxation issues 1. prat Smiths tax issues: take out out a) How is the $300,000 come up to for purposes of federal tax income? washbasin stated that he original a lump sum of $300,000 for winning a exercise on behalf of a ain defacement thickening (total bailiwick winnings $2,000,000). John questi unmatchabled how the $300,000 should be taxed. applicable Law & axerophthol; compendium: Per the IRS: In approximately cases, you must include in gross income everything you receive in payment for personal services. In addition to wages, salaries, commissions, remunerations, and tips, this includes other forms of honorarium such as adorn benefits and stock options. (IRS.gov, 2012). Conclusion: though the winnings were part of a personal injury lawsuit, and well-nigh 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 rigorous 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 air expense must be two common 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 helpf ul and appropriate for your trade or busines! s. An expense 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 function 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: hoard sums...If you want to get a wide of the mark essay, rove it on our website: BestEssayCheap.com

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