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Tax Sample Questions Example

Mini Tax Research cases

Instructions

Please read the facts for the following tax issues.  When noted, use the appropriate research database to obtain the answers.  If a specific research database is not required, you may use the database of your choice.  There are eight questions that need to be answered for this assignment. 

QUESTION #1

  • Find Rev. Rul. 99-7
  • Based on headnotes in the Rev. Rul. tell the class:
    • Facts: Commuting expenses between work location and residence are not deductable. There are three exceptions to this rule. Temporary here means that employment should be last for one year or less.
    • Issues: Business deductions, travel expenses
    • IRS’ holding for the following revenue ruling: IRS holdings in this case are that commuting tax between location of work and residence place are not deductable with three exceptions. These exceptions are commuting between residence of tax payer and a location of work outside the area of metropolitan where tax payer work and live. Another exception is that when tax payer has one or more than one regular locations of work away from his residence. Third exception to the rule is that where tax payer lives in business principal place under section 280 A.

QUESTION #2

Mary, also known as the Cat Lady by her friends, incurred unreimbursed volunteer expenses while caring for foster cats in her private residence. Her expenses consisted primarily of payments for veterinary services, pet supplies, cleaning supplies, and household utilities. Mary claimed a $10,000 charitable-contribution deduction for the expenses on her 2004 federal tax return. The IRS issued a notice of deficiency denying the deduction. Mary has come to you for advice as to whether she can deduct these expenses as charitable deductions.

USE CCH SEARCH ENGINE:Not RIA

She will not be allowed to deductions as charitable contribution expenses because these are related to her personal expenses not related to charitable deductions. Section 170(c) has not applied here because she is not qualifying for providing services under this section to the charitable organization. She has failed to substantiate expenses as under sec. 170(f)(8). She cannot deduct her expenses as deductions for charities.

Tax Sample Questions

QUESTION #3

Taxpayer A entered into a contract with X, a charitable organization, to sell his house to the organization. The charity held a raffle to sell the house as a prize to the holder of the winning raffle ticket. Taxpayer B had the winning raffle ticket and won the house. Has Taxpayer A made a deductible contribution under IRC Sec. 170? Are the amounts paid to the charity for the purchase of raffle tickets deductible as charitable contributions under IRC Sec. 170? Is the cost of losing a raffle ticket deductible as a wagering loss under IRC Sec. of 165(d)? Are there other issues?

USE RIA SEARCH ENGINE: NOT CCH

Tax payer A’s capital gain would be deductable up to the 30% of the total income under section 170. Amount paid as raffle ticket for the charitable contribution would be deductable under section 170. Section 165(d) states that wagering loss would be tax deductable up to the extent of the gain. No other issues are present in this case.

QUESTION #4

Maria has an unusually strong constitution and the highest quality blood and plasma available for transfusion.  She manages to stay healthy while donating blood at the hospital two or three times a week.  For each donation, the Blood Center pays Maria $245 for the blood.  Maria drives forty miles round-trip to the hospital to make her donations.  Moreover, she spends about $35 every month for vitamins and other pills prescribed by her physician to ensure that her general health and blood quality do not degenerate in light of her frequent donations.  Last year, (2007) Maria quit all of her part-time jobs and now (beginning in 2008) survives financially solely by these blood donations. She has come to you for advice regarding her tax situation.

Section 170(b) (iii) states that contribution made to the hospitals are deductable under IRS. This income would not be taxable under these years.

QUESTION #5

  • Find Revenue Ruling 2003-36
  • What is the second issue of the revenue ruling?

Second issue of the revenue ruling is whether a decedent estate’s executor may file a request under section 6015 request for the purpose of relief from the several and joint liability on decedent’s behalf.

  • What are the facts related to this second issue?

In taxable year 2000, W and H were married. They jointly claimed for deduction on joint return related to H’s investment. In 2001, this service was disallowed. After death of W, his executor filed form 8857.

  • With respect to second issue, what Internal Revenue Code(s) are at issue?

Under section 6903, decedent estate’s executor has authority to file a relief request to section 6015 up to the extent that decedent has fulfilled requirement in his life.

QUESTION #6

Mary receives an award of a personal computer from her employer in recognition of her outstanding work developing a new office management process.  All employees were considered for this award, which is valued at $3,000.  How much of the award is taxable to Mary?

This award would be tax deductable because the gift or award receives from the employer by the employee is deductable if its value is not exceeding from $5000 as per section 74(c). In this case, it is $3000, which would be fully tax deductable.

QUESTION #7

Jane’s grandmother survived the holocaust and received money from a holocaust survivor’s fund. After Jane’s grandmother died, her grandmother left the restitution money to Jane.  Does Jane have to include this money into her gross income?

As per section 102 of IRS it would not include its gross income because this section states that gross income would not include value of property received from inheritance.

QUESTION #8

Taxpayer, US Marine Lieutenant Colonel Smith, while on active duty, moved from his home Michigan to California. He incurred expenses moving his sailboat from his old residence to his new residence. The Marine Corps did not reimburse the Taxpayer for the boat moving expenses. The Taxpayer was an active sailor and used the boat for recreational activities. He also resided for three weeks on the boat prior to his move and for 10 weeks after his move. Can the Taxpayer deduct the expenses incurred in moving the sailboat? Also, would the expenses be deductible if the Marine Corps had reimbursed the Taxpayer for the sailboat moving expenses?

Revenue rule 99-7 states that as section 162 that all expenses incurred for trade business are exempt. Personal expenses would not be deductable. No, in case of disbursements, these expenses would not be deductable.

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