Category: Writing

1. Most exclusions exist for one of two reasons. What are
those reasons? Give examples of exclusions that exist for each.
2.
a. lf a gift of propert y is made, who is taxed on income
produced by the propert y?
b. How can interfamil y gifts reduce a family’s total tax
liability?

Constructive Dividend. Brad owns a successful corporation
that has substantial earnings and profits. During the year, the following
payments were made by the corporation :
a. Salary of $250,000 to Brad. Officers in other
corporations performing similar services receive between $50,000 and $85,000.
b. Rent of $25,000 to Brad. The rent is paid in connection
with an office building owned by Brad and used by the corporation . Similar
buildings rent for about the same amount.
c. Salary of $5,000 to Brad’s daughter, who wor ked for the
compa ny full-time during the summer and part -time during the rest of the year
while she attended high school.
d. Alimony of $40,000 to Brad’s former wife. Although Brad
was personally obligated to make the payments, he used corporat ion funds to
make the payments . Discuss the likelihood of these payments being created as
construct ive dividends. If a payment is deemed to be a construct ive dividend,
indicate how such a payment will be treated.

1. What is meant by the terms administrative exclusion and
judicial exclusion?
2. There is no specific statutory exclusion for welfare
benefits. Nevertheless, the lRS has ruled that such benefits are nor taxable.
ls this within the authority of the lRS?
3. What was the issue in the tax case Eisner v. Macomber?
Why is the case important?

Al imony . As a result of their divorce, Fred agreed to pay
alimony to Tammy of $20,000 per year. The payments are to cease in the event of
Fred’s or Tammy’s death or in the event of Tammy’s remarr iage. In addition,
Tammy is co receive their residence, which cost chem $100,000 but is wort h
$140,000.
a. How will the $20,000 payments be treate d by Fred and
Tammy if covered by prior law?
b. How will the payments be treate d if the divorce is
covered by new law?
c. What is Tammy ‘s basis in the residence?
d. What role would a tax adviser play in a divorce?

Jim and Linda are your tax clients. They were divorced nvo
years ago, and the divorce decree stated that Jim was to make monthly payments
co Linda. The court designated $300 per month as alimony and $200 per month as
child support, or a tota l of $6,000 per year. Jim has been unemployed for much
of the year and paid Linda $2,000 that he said was for child support. In
addition, Jim transferred the title to a three -year-old automobile with a
$4,000 FMV and basis of $7,000 in exchange for her promise not to pursue any
claim she has against him for the unpaid child support and alimony. Does Linda
have co report any alimony and is Jim entitled to an alimony deduction? Draft a
memo for the file chat discusses the tax consequences for both Jim and Linda.

Short Tax Fomt. Anne Banks is a single, 60-year old retired
teacher who does not itemize. These forms are found in Figures 1:3-5 and 1:3-6.
Complete page 2 of her Form 1040.

Sally W. £manual, a teacher, had the following dividends and
interest during the current year:
Additional information pertaining to Sally £manual includes
The taxable portion of the pension is $7,000. Sally actively
participates in the rental activity. Other relevant information includes
Address: 430 Rumsey Place, West Falls, California 92699
Occupation: Credit manager
Social Security number: 123-45-6789
Marital status: Single
Complete Sally’s Schedule 1, Schedule Band compute her
taxable income on Form 1040. Assume Schedule E has already been prepared.

Gary received qualified dividends from Ace Corporation of
$1,000 and from Tray Corporation of $1,400. Gary’s itemized deductions equal
$19,000, and withholding for federal income taxes is $14,000. Compute Gary’s
tax due or refund due.

Gary earned $97,000 as an executive. Gary, who is single,
supported his half sister, who lives in a nursing home. His half sister had no
income during the year. Gary received the following interest: $400 on City of
Los Angeles bonds, $200 on a money market account, and $2,100 on a loan made to
his brother. Gary spent one week serving on a jury and received $50. Gary
received a refund of federal income taxes withheld during the prior year of
$1,200 and a stare income tax refund of $140. Gary had itemized deductions last
year of $18,000 which included $1,000 of stare income taxes.