Preview

Corporate Tax Case Study

Good Essays
Open Document
Open Document
1176 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Corporate Tax Case Study
SCENARIO: You are a CPA with an office in NearLakes City and clients consisting primarily of professionals, entrepreneurs, and small business owners. John 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 received 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 some additional tax planning advice to ask of you.
ROLE: After reviewing John and Jane Smith's points of view, it will be your turn as a tax professional to decide on the best course of action from a tax perspective on their issues. Prepare a three page memo (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 damages, of which my fee 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 each? Also, I am thinking about buying 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 established 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 new, bigger house that I've 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 earned me $20,000 last year. Do my business activities constitute a trade or

You May Also Find These Documents Helpful

  • Satisfactory Essays

    4) An advantage of filing a consolidated return is that losses of one affiliated group member may be offset against the taxable income of other group members in the same tax year.…

    • 11596 Words
    • 48 Pages
    Satisfactory Essays
  • Good Essays

    John Smith is a Lawyer that just won a two year lawsuit and collected fees of $300,000 paid to his firm along with the $25,000 for recovery of expenses that was paid up front. John is thinking about purchasing his office building that he is currently leasing at $3,500 per month.…

    • 976 Words
    • 4 Pages
    Good Essays
  • Satisfactory Essays

    New Mexico is an enchanting land for business. Like the rest of the states, New Mexico has its own corporate income tax laws. For the year 2015, the state corporate tax rate ranges from 4.8% of the total net income less than $500,0000; 6.4% of excess over $500,000; and 6.9% in excess of $1,000.000. New Mexico imposes a corporate income tax on the net income of every domestic corporation and every foreign corporation employed or engaged in the transaction of business in, into, or from this state. These include all corporations organized under the laws of the State of New Mexico and corporations exempt from federal income tax under the Internal Revenue Code which have unrelated business income. There are three filing options of controlled corporations…

    • 222 Words
    • 1 Page
    Satisfactory Essays
  • Good Essays

    Tax Preparing CPA

    • 619 Words
    • 3 Pages

    The case talks about John Jones who is a CPA with 20 years of experience in preparing tax returns for clients. In 2013, Jones prepared a list of taxpayers that contained some specific information, which he could use to get in touch with those taxpayers for providing them with information regarding business and economic conditions, and also use these info for tax education and analysis purposes. As a result, the main objective of this paper is to analyze whether the action taken by Mr. Jones is a violation of client confidentiality or not.…

    • 619 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    Tax research Chapter 3

    • 1102 Words
    • 5 Pages

    10. Treaties may be terminated in several ways. They may expire because of a specific congressional time limitation,…

    • 1102 Words
    • 5 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Tax Memorandum Case Study

    • 303 Words
    • 2 Pages

    FACTS Cindy and Ralph Edmonds own TidyCo. Inc. They have a negative accumulated and current E&P and a basis in the stock of $300,000. They have been found to have $200,000 unreported income from the Laundromat they own in cash in their home. The IRS is planning on taking them to criminal court to charge them with evasion.…

    • 303 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    1. For the Tax year 2004, is SK eligible to switch from the accrual to cash method of accounting under Rev. Proc. 2001-10?…

    • 1052 Words
    • 5 Pages
    Good Essays
  • Good Essays

    1. If you were Mr. Vincent, executive vice president of Monmouth, Inc., would you try to gain control of Robertson Tool in May 2003? Explain.…

    • 1046 Words
    • 3 Pages
    Good Essays
  • Good Essays

    subject to the Commercial Activity Tax (CAT). The test states that companies with no connection to Ohio at all are still subject to the CAT if they have sales in the state totaling at least $500,000. The “factor presence test,” which has now come to be referred to as an “economic nexus” standard, makes it clear that there is no need for companies to have any physical connection with the state.…

    • 641 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Dr. Anthony Falgiani’s income tax class captured my interest and I knew immediately that tax would be my choice for future employment. At the suggestion of my Professors I volunteered with the VITA program which aided me with the human aspects of the sometimes difficult tax concerns that everyday individuals encounter as a preparer for the 2014 tax year and as a Site Coordinator for the 2015 tax year. As a Site Coordinator I had the chance to guide USCB students in their tax preparer roles and seek guidance and clarification on tax situations that were unfamiliar to me from my instructors Professor Jane Lambert and Dr. Anthony Falgiani. Consequently, my role in the VITA program caused me to pause and reflect that passing the CPA exams would not be enough to fill the gaps in my education to work in the public sector. USC’s taxation track is specifically geared toward my preference of practice after I graduate and will groom me to identify accounting concerns and provide value added solutions for my future clients.…

    • 641 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    Pace Corporation has a $1,500 ($10,000 - $8,500) charitable contribution carryover to the next five years. Pace also has a…

    • 114 Words
    • 1 Page
    Satisfactory Essays
  • Good Essays

    1. In the mid 1800s the corporation emerged as a "legal person" by way of maneuvering in the legal system. For the next 100 years we saw the rise to dominance of the corporation. The corporation created unprecedented wealth but at what cost? The externalities of corporate operations are responsible for countless cases of illness, death, poverty, pollution, exploitation and lies. Voice your opinion on this.…

    • 680 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    Gibson, Inc., expects perpetual earnings before interest and taxes of $1.2 mil. per year; the firm’s pre-tax cost of debt is 8% p.a., and its annual interest expense is $200,000; the company analysts estimate that the unlevered cost of Gibson’s equity is 12%; Gibson is subject to a 35% corporate tax rate.…

    • 322 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    Accounting Case Study

    • 2304 Words
    • 10 Pages

    This case study involves the overview and financial analysis of two major telecommunications companies in the world. The two companies are compared based on their financial performance for the last two years by analyzing their income and balance sheet statements. Financial ratios are also calculated to see which company has better profitability, liquidity and solvency.…

    • 2304 Words
    • 10 Pages
    Powerful Essays
  • Better Essays

    Singapore already start adopting a one-tier corporate tax system effect from 1 January 2003. In Malaysia, it is referred as the ‘single tier’ system. The government allowed a six-year transitional period to enable companies with unutilized dividend franking credits to pay franked dividends. From 1 January 2008, all resident companies in Singapore will come under the one-tier system. Meanwhile, other countries including Hong Kong, Ireland and also Malaysia are adopting the one-tier system effective from 1 January 2014.…

    • 2995 Words
    • 12 Pages
    Better Essays