John Smith Tax Issues

You Decide Assignment 1. John Smith value bring downs: a. How is the $300,000 tempered for purposes of federal tax income? The issue is how the $300,000 will be hold for federal income tax purposes. According to the privileged Revenue figurer 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 acting 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 are deductible. Since the $25,000 reimbursed expenses were in sexual relation to the operate provided, it will need to be include in gross income but will be tre ated as a deduction to the adjusted gross income. c. What is your decisiveness 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-line(prenominal) form.

Since John did non 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 bullion method. In order to avoid his income for the current year, he correct up file an amend ment to his previous tax year to throw to u! se 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 hold up expenses. 2. Jane Smith tax issues: a. What are the unlike tax consequences...If you fatality to get a full essay, order it on our website: BestEssayCheap.com

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