Tax Accounting
BELOW ARE 10 QUESTIONS. ALL ANSWERS MUST INCLUDE DETAILED EXPLANATION INCLUDING CODE SECTIONS
1-The results approved by the Supreme Court in Sanford and Brooks seems unfair. What are your thoughts? What exceptions to the annual accounting system have been implemented since?
2-From 2015-2018, Paul Mann was employed by DJT, Inc. as a as a purchasing agent. DJT, Inc. sued Mann for fraud. The court ordered that Mann was to pay to DJT, Inc. damages in “the sum of $5,000,000, representing $4,500,000 in `kickbacks’ illegally received by Mann from DJT, Inc.’s suppliers, and $500,000 in salary paid to Mann by DJT, Inc. while Mann was acting in a manner disloyal to his employer.Mann paid to DJT, Inc. $4,000,000 in 2019 and $1,000,000 in 2020. Is Mann entitled to IRC §1341 relief?
3-Ruby Corporation, Diamond Corporation, and Emerald Corporation are equal partners in the RDE Partnership. The partners’ tax year-ends are as follows:
Ruby December 31
Diamond April 30
Emerald September 30
What year end must the partnership use?
4-When a taxpayer fail to regularly keep book and records to determine its year end can it nevertheless choose fiscal year end?
5-Is a C corporation limited in selecting a year end?
6-Can a taxpayer be prevented from using a particular method of accounting simply because the size of the business? For example, can a national law firm with three hundred attorneys and four hundred fifty office staff with gross receipts of $150,000,000 use the cash method?
7-On December 30, 2018 Walter receives a check for $500 drawn on an Owner’s account at the Last National Bank for payment for services rendered. Walter immediately deposits the check in his account at the First National Bank. The First National Bank places a hold on the account for several days which results in Walter being unable to access the funds until January 4, 2019.
- Assume, nevertheless, that the check clears in the normal course of business and Walter is able to access the funds on January 4; in which year should Walter include the check and income?
- How would your answer be different if the check was dishonored when Walter presented the check for payment?
8-a.Under the accrual method when must income be recognized?
b.Under the accrual method when may an expense be deducted?
9-When is a taxpayer required to recognize income under the all events test?
10-Which one of the following will result in an accruable expense for an accrual-basis taxpayer?
- An invoice dated prior to year end but the repair completed after year end.
- A repair completed prior to year end but not invoiced.
- A repair completed prior to year end and paid upon completion.
- A signed contract for repair work to be done and the work is to be completed at a later date.
Explain your answer.
