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Refer to the facts in Problem 1:10-48 for John and Ellen
Brite. The following information is also available for them:
• John and Ellen live at 111 Maple Street, Johnsonville,
Colorado 81733.
• Brite-On is located at 3900 Marker Street, Johnsonville,
Colorado 81733. Its employer identification number is 44-1357924.
• The business uses the accrual method and did nor make any
payments char would require Form 1099 to be filed. Ir has used the cost method
ro value inventory for many years.
• John started using his automobile in his business on July
1, 2011. During 2018, it was used 7,000 miles for John’s business, 1,800 miles
for commuting, and 6,500 miles for other reasons. The automobile and Ellen’s
automobile were available for personal use and during off-duty hours. John has
written evidence to support his deduction for automobile expenses.
Complete the Brites’ 2018 Form 1040, Schedules 1, 4, 5, A,
C, and SE, and Forms 4562 and 4797.

The Morr iss Corporation is a very successful and profitable
manufacturing corporation. The corporation just comp leted construction of new
corporate offices, primarily for its top executives. The president and founder
of the corporat ion, Mr. Timothy Couch, is an avid collector of artwork and has
instructed that the lobby and selected offices be decorate d with rare
collections of art. These expensive works of arr were purchased by the corpora
– tion in accordance wit h Couch’s directives. Couch justified the purchase of
these artworks on the premise chat (1) they are excellent investments and
should increase in value in the future, (2) they provide an appropriate and
impressive office atmosp here when current and prospective customers visit the
corporation’s offices, and (3) the artwork is depreciable property and the
corporation will be able to rake sizable writeoffs against income. The
Financial Vice-President of the corporatio n has requested your advice as to
whether the works of arr are, in fact, depreciable property . Prepare a researc
h memorandum for the Financia l Vice-President on this issue.
A partia l list of research sources is provided below.
• Rev. Ru/. 68-232, 1968 -1 C.B. 79
• Shauna C. Clinger, 60 T.C.M. 598 (1990).
• Simon v. Comr., 103 T.C. 247 (199 4), aff’d, 95-2 USTC
150,552 (2d Cir. 1995) nonacq. 1996 -2 C.B.l.
• Liddle v. Comr., 103 T.C. 285 (1994), aff’d, 95-2 USTC
~50,488 (3rd Cir. 1995)

1. Why is it desirable for a new taxpayer to select an
appropriate tax year?
2. What restrictions apply to partnerships selecting a tax
year?
3. Does a similar restriction apply to S corporations?
Explain.

1. How could the 52- 53-week year prove to be beneficial co
taxpa yers? Explain.
2. Under what circumstances can an individual tax – payer
change tax years without IRS approval?
3. ls there any instance in which a change in tax years is
required? Explain.

1.
a. In what situations will a tax year cover a period of less
than 12 months?
b. Under what conditions is a taxpayer required co annualize
income?
c. Does annua lizing income increase or decrease the
taxpayer’s tax liability? Explain.
2. When is a final tax return due for an individual who uses
a calendar year and who dies during the year?

1. What treatment is given roan insta llment sale involving
related people?
2.What is the primary impact of the imputed interest rules
on insta llment sales?
3. What changes in accounting method can be made without IRS
approval?

1. Can the IRS require a taxpayer to change accounting
methods?
2.Explain the purpose of the four-year method used in compu
ting the tax resulting from a net adjust – ment due ro a change in account ing
methods .
3. If a taxpayer changes the method of accounting used for
financia l reporting purposes, must the taxpayer also change his or her method
of accounting for tax purposes?

Lana operates a real estate appra isal service business in a
small town serving local lenders. After noting that lenders must pay ro bring
in a surveyor from out of town, she completes a course and obtains a surveyor’s
license that enables her to provide this service also. She now provides both
services as a proprietor . What tax issues should Lana consider?

John owns a small farm on a lake. A local developer offers
John $400,000 cash for his farm. The developer believes John’s farm will be
very attractive to home buyers because it is on a lake. After John turns down
the initial offer, the developer offers to pay John $250,000 plus an amount
equal to 10% of the selling price for the homes that are developed and sold.
Identify the tax issues John should consider if he accepts the offer

Lee is starting a small lawn service. On the advice of his
accountant, Lee has formed a corporation and made an S corporation election.
The accountant has asked Lee to con – sider electing a fiscal year ending on
the last day in February . The accountant pointed out that Lee’s business is
likely ro slow down in the winter. Also, the accountant indicated chat the
February year end would permit the accountant ro do Lee’s account ing work
after the busy season in accounting is over. What tax issues shou ld Lee
consider?