Hi John and Jane, Please find my advice and recommendations on your tax issues below: John Smith tax issues: A – The $300,000 will be included as gross income. It is compensation for services rendered. B – I am having trouble understanding this $25,000 recovery for expenses paid. Was this the amount of money the client had already paid out of his pocket for your services? Or did you suffer these expenses to work on this case?
Memo To: John & Jane Smith From: Date: 12/2/2014 Re: Summary of various tax issues Your first question is how is the $300,000 treated for purposes of federal tax income? In Code 61(a), income derived from services is one of the listed forms of taxable income. This includes fees, commissions, fringe benefits and similar items. Since the compensation was earned this year, even though you worked on the case for two years, you will include it as ordinary income this year. You can reduce your tax liability by deducting necessary business expenses that were paid in the same
There are three ways of working out how profitable a business really is: * Gross profit percentage – This calculation shows gross profit as a percentage of the turnover. Gross profit percentage is also sometimes called gross profit margin. The calculation shows how well the business is managing its purchases of stock. A high gross profit percentage shows the business is doing well as it is controlling the cost of its purchases. * Net profit percentage – This calculation takes the idea of profitability one stage further by actually considering the profit as a percentage of turnover after all the other expenses have been taken out.
61(a),(1)) Conclusion: The tax issue here is that John Smith wants to know how the $300,000 he earned through his client fee is taxed. The $300,000 is taxed as ordinary income and is taxed in the year received. John Smith worked on the case for two years but he did not earn the $300,000 until this year so he will include it in this year’s taxable income. Therefore John Smith needs to include the entire $300,000 as ordinary income on his Federal tax return Issue b) How is the $25,000 treated for purposes of federal tax income? Applicable Law & Analysis: “Gross income does not include income attributable to the recovery during the taxable year of any amount deducted in any prior taxable year to the extent such amount did not reduce the amount of tax imposed by this chapter.“ (IRC Sec.
Can MegaCorp, Inc. deduct the loss as ordinary and necessary under IRC 162? Short Answer IRC 162 provides the general rule for determining deductibility of trade or business expenses as ordinary and necessary. This is the standard claim for support of deductibility, but there is no provision in this Code section for deducting items that are capital in nature, which is the IRS contention under IRC 263. The statute is silent as to litigation settlements paid as a result of corporate acquisitions. IRC 263 provides the general rule that no deduction shall be allowed for items that are capital in nature.
Another element that must be established beyond a reasonable doubt so as to secure a conviction is that When the US government provides any section of money or property that is essential or demanded, or the state decides to return a contractor, grantee or recipient the requested or demanded money, false claim documents do not need to be submitted directly to the government as the provision virtually covers everything that is of value. 5. Lastly, the false claim is also founded on the element an individual has possession, custody, or control of a property or money used by the government, and lastly, intending to defraud the government. 2. HIPAA privacy standards were designed to accomplish what three broad objectives?
It is permissible under rule 301 [ET section 301.01] for a member to disclose the name of a client, whether publicly or privately owned, without the client's specific consent unless the disclosure of the client's name constitutes the release of confidential information. 28) Is failing to file personal taxes a discredit to the accounting profession? a. Yes 29) Are referral fees allowed? a.
(TCO A) A taxpayer may litigate a tax dispute without first paying the tax in the: 0 U.S. District Court . . ; @ U.S. Tax Court. 0 U.S. Court of Federal Claims. 0 All of the above (TCO F) A business bad debt is deductible for tax purposes as a(n): .
Both Company A and Company B question future cash flows that will be generated over the first five years of operation. Businesses use the NPV to determine if a purchase or investment is profitable. Once that is decided, they look at the lump sum value above the capital budget period is more than the amount of the company being sold. If the seller refuses to sell the company less than the lump sum
2. Ratio Analysis: This section includes five areas which are Profitability, Liquidity, Asset Utilization, Leverage and Capitalization, and Market Valuation to identify the performances of Hasbro and LeapFrog. 3.3 Profitability: Profitability measures the ability of the company to earn profits. Big company and small company usually have different earnings; however, they might have the same percentage return on their assets. Generally, profitability includes Gross Profit on Sales, Return on Sales, Return on Assets, and Return on Equity.