Category: Writing

Bala and Ann purchased as investments three identica l
parcels of land over a several – year period. Two years ago they gave one
parcel to their daughter, Kim, who is now age 16. They have an offer from an
investor who is interested in acquiring all three parcels. The buyer is able to
purchase only two of the parcels now, but wants to purchase the third parce l
tvo or three years from now, when he expects to have available funds to
acquire the property. Because they paid different prices for the parcels, the
sales will result in different amounts of gains and losses. The sale of one
parcel owned by Bala and Ann will result in a $20,000 gain and the sale of the
ocher parcel will result in a $28,000 loss. The sale of the parcel owned by Kim
will result in a $19,000 gain. Kim has no other income and does not expect any
significant income for several years. Bala and Ann, however, are in the 37% tax
bracket. They do nor have any other capital gains chis year. Which two
properties would you recommend that they sell this year? Why?

Taxpayers who deduct an expense one year bur recover it the
next year are required ro include the recovered amount in gross income. The tax
benefit rule provides relief if the original deduction did nor result in any
tax savings. Does this rule provide relief to taxpayers who are in a higher tax
bracket in the year they recover the previously deducted expense?

1. Corporations are taxed on the income they earn, and
shareholders are taxed on the dividends they receive. What provisions in the
tax law reduce this “double tax” burden?
2. Explain the relationship between dividends and earnings
and profits.
3. On what basis did the Supreme Court in Eisner v. Macomber
decide that stock dividends are nontaxable?

1.
a. Explain the difference between the treatment of prepaid
income under the tax law and under financia l accounting.
b. Why are the two treatments so different?
c. What problem does this treatment create for taxpayers?
2. Under what conditions is an accrual-basis tax – payer
allowed to defer reporting amounts re – ceived in the advance of the delivery
of goods?

1.
a. Define the term constructive receipt. Explain its
importance.
b. Explain three restrictions on the concept of constructive
receipt.
2. What recent change was made to the tax treat – ment of
dividends received by U. S. corporations from foreign subsidiaries?
3. When is income considered to be earned by an
accrual-basis taxpayer?