John Smith Tax Issues

You Decide Assignment 1. John Smith value upshots: a. How is the $300,000 hardened for purposes of federal tax income? The issue is how the $300,000 will be bobby pin for federal income tax purposes. According to the home(a) Revenue information processing system code Sec. 61(a), megascopic income includes all income from whatever source derived unless specifically exempted by law. Under this code, the $300,000 is considered unwashed income since this is income earned by perform service as a part of Johns cover. b. How is the $25,000 case-hardened for purposes of federal tax income? The issue is how the $25,000 of reimbursed outlays will be do by for federal income tax purposes. According to the Internal Revenue coordinate Sec. 162, Ordinary and necessary expenses incurred to carry on a trade or business ar deductible. Since the $25,000 reimbursed expenses were in sex act to the operate provided, it will need to be include in gross income bu t will be hard-boiled as a deduction to the adjusted gross income. c. What is your closing regarding reducing the ratable amount of income for both (a) and (b) above? The issue is determining how to cut off the ratable income for both the $300,000 and the $25,000 reimbursed expenses that are included in gross income for the on-going form.

Since John did not know if he were handout to win the case that he worked on for two geezerhood and therefore receive the income, he was unable to use the accretion method and had to use the bills method. In order to avoid his income for the current year, he e ffect up file an amendment to his previous t! ax year to modification to use the accrual method. With this method, he can split his income and expenses amid two years, effectively reducing his taxable liability for the current year. John should identify all of his expenses that were incurred during the year that were in relation to this case. He can deduct salaries expense and all voyage expenses. 2. Jane Smith tax issues: a. What are the unlike tax consequences...If you inadequacy to get a full essay, order it on our website: BestEssayCheap.com

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