Questions from Federal Taxation

Q: You are preparing a current year (Year 2) individual tax

You are preparing a current year (Year 2) individual tax return for Robert Lucca, a real estate developer and long-time client. While preparing Robert’s individual tax return you learn that last year...

Q: A client asks about the relevance of state law in classifying items

A client asks about the relevance of state law in classifying items as principal or income. Explain the relevance.

Q: You are in the process of doing income tax projections for the

You are in the process of doing income tax projections for the Estate of Esther Simmons, who died January 3, 2017. The Estate has paid appraisal fees for having her real estate holdings appraised for...

Q: Roy Ritter died two years ago. Among the assets he owned

Roy Ritter died two years ago. Among the assets he owned were Ritter Ranch, a cattle ranch consisting of 12,220 acres in Texas. In accordance with Roy’s will, the ranch along with stocks producing sub...

Q: Ernest Jacobson created an irrevocable trust in February of last year and

Ernest Jacobson created an irrevocable trust in February of last year and designated his friend Eileen Frazier as trustee. Eileen is empowered, for life, to distribute such income as she deems appropr...

Q: A client, Sam Curren, established the Curren Trust earlier this

A client, Sam Curren, established the Curren Trust earlier this year. In addition to stocks and cash, the trust’s assets include a life insurance policy on the life of Mr. Curren. The trust is both th...

Q: Your manager advises you that Sam Skinner, a long-time

Your manager advises you that Sam Skinner, a long-time client, died on February 13 of the current year, survived by his wife Sue Skinner and several adult children. The Skinners are residents of a non...

Q: A long-time client, Horace Haney, wishes to avoid

A long-time client, Horace Haney, wishes to avoid currently recognizing revenue in a particular transaction. A recently finalized Treasury Regulation provides that, in such a transaction, revenue shou...

Q: This year, Ark Corporation acquired substantially all the voting stock of

This year, Ark Corporation acquired substantially all the voting stock of BioTech Consultants, Inc. for cash. Subsequent to the acquisition, Ark’s chief financial officer, Jonathan Cohen, approached E...

Q: Assume that a taxpayer owes additional taxes as a result of an

Assume that a taxpayer owes additional taxes as a result of an audit. Give two reasons why the IRS might not impose a substantial understatement penalty on the additional amount owed.