Corporate Tax Case Study Essay Example for Free

Corporate Tax Case Study EssayYou are a CPA with an office in NearLakes city and clients consisting primarily of professionals, entrepreneurs, and small business owners. bath Smith, Esq. , a practicing attorney with offices near yours, walks in your office and wants advice from you relating to a recent influx of cash he current as a result of winning a large jury verdict on behalf of his client in a personal injury case. His wife Jane Smith accompanies him during your meeting because she has virtually additional task planning advice to ask of you. After reviewing John and Jane Smiths points of view, it will be your gaming as a revenue enhancement professional to decide on the best course of action from a tax perspective on their issues. Prepare a three rascal memoranda (at least 900-1,500 words per page) to John and Jane Smith addressing the issues presented. PLAYERS JOHN SMITH ESQ. I worked on this case for over two years. The jury awarded my client $2,000,000 in damage s, of which my tiptoe was $300,000 plus recovery of expenses paid up front in the amount of $25,000. How is the $300,000 taxed? What about the $25,000?What can I do to minimize the tax consequences of separately? Also, I am thinking about bribeing the building that I currently lease my office space in. My current lease is $3,500 per month. How is this lease reported on my income tax returns (either personally or for my business which is a separate law practice pictureed as an LLC)? Do I get better tax benefits for paying the lease or for buying the building? What are the differences? PLAYERS JANE SMITH-PROFESSIONAL I think that the fees would be better used for paying off our house and buying a unexampled, bigger house that Ive had my eye on.Does it make better tax sense for us to pay off the mortgage, sell the house, and buy a new house, or should we just use the money to buy the new house after selling the old house? Also, I sell handcrafted jewelry which realize me $20,000 last year. Do my business activities constitute a trade or business for federal income tax purposes? Or, is this just a hobby? Should I establish a separate trade or business to get tax benefits on these earnings? Does it make any difference that I use my car primarily for transporting my jewelry to divers(prenominal) shops around town?Finally, I think I can earn much money if John were willing to aim $15,000 for new jewelry making equipment since my original equipment, which cost $10,000 five years ago, is almost obsolete. Does this make sense from a tax perspective? Given the scenario, your function and the information provided by the key players involved, it is time for you to make a decision. If you are finished reviewing this scenario, close this window and return to this weeks You Decide item, in your course window, to make love the activity for this scenario. You can return and review this scenario again at any time.Prepare a three-page memo (at least 900-1,500 words per page) to John and Jane Smith addressing the issues presented 1. John Smith tax issues a. How is the $300,000 treated for purposes of federal tax income? b. How is the $25,000 treated for purposes of federal tax income? c. What is your determination regarding reducing the taxable amount of income for both (a) and (b) above? d. Is it more beneficial to continue leasing the business space or to buy the building? 2. Jane Smith tax issues a. What are the different tax consequences between paying belt down the mortgage (debt) and assuming a new mortgage (debt) for federal income tax purposes?b. erect John and Jane Smith utilize a 1031 tax exchange to buy a more expensive house using additional money from Johns case? c. Does Jane have a business or hobby? Why is this bank note important? d. Would Jane (and John) realize better tax benefits if she had a separate business for her jewelry-making activities? e. What tax benefits would John realize if he invested $15,000 in Janes jewelry making? f. Can Jane depreciate her vehicle or jewelry-making equipment? How? 3. John and Jane Smith tax issue a. Should John and Jane file separate or joint tax returns?You Decide Its your turn as a tax professional to decide on the best course of action from a tax perspective on their issues as presented above. For each issue, begin by restating the issue and numbering as shown above i. e. , 1(a), 1(b), etc. . Next, explain and discuss the tax rules that apply to the issue, which you gleaned from your tax research. Then, conclude with a unequivocal act to the issue, supported by citations to the sources used. Sofor each issue, you should 1. state the issue 2. explain and discuss the applicable law (IRC sections, regulations, court decision, and so forth) and 3.present your answer in the form of a concluding paragraph thatrefers to specific language from the IRC sections, regulations, court decisions, and other sources (if applicable) to support the conclusion. *A template has be en provided for your use in preparing this activity. entertain use it Citations Citations are required. You must provide citations whenever you refer to the sources of tax law used in this memorandum. You may cite your sources in numbered footnotes, numbered endnotes, or in parentheses flat after the sentence mentioning the cited source.Grading Rubric Category Points Description Superior 100125 Content and subjectEasily identifiable, clear meets or exceeds page or word-length requirement all required citations are provided StructureApparent, understandable, and applicable excellent flow and well structured AnalysisInteresting and novel provides different perspectives demonstrates life-sustaining thinking and critical analysis at a high level MechanicsVirtually devoid of errors in grammar, syntax, punctuation, and spelling Achieving 8099Content and subjectConcrete overall, but may be slightly unclear meets or exceeds page- or word-length requirement some citations missing Structur e mostly clear and appropriate AnalysisEvidence relates to the content evidence may lack some clarity critical analysis and critical thinking obvious MechanicsGood sentence structure (syntax), grammar, punctuation, and spelling, with minor errors Average 6579 Content and subjectFairly easy to read and understand, but composition meanders from topic or lacks cohesion or content meets page- or word-length requirement missing most citations StructureOverall good, with minor shortfallsAnalysisSome critical thinking, but minimal or no analysis or further discussion by the fully grown learner MechanicsSentence structure has some errors relative to syntax, grammar, punctuation, and spelling Below Average lt 65 Content and subjectOften unstructured and vague content not totally applicable to the cover requirements or introduces substantial material not relevant to the assignment and/or the relevant discussion points no citations provided for tax law research Structure in general unclear and difficult to visualizeAnalysisVery limited with no analysis or further discussion by the adult learner that demonstrates adult learner critical thinking/analysis MechanicsNumerous mistakes in sentences, paragraph formatting, spelling, and grammar that subtract from the content of the paper writing errors suggest minimal likeliness that paper was proofread for errors prior to submission writing not at graduate level