Question
On his tax return for year X, Evan reported $40,000 of taxable income. After a review of Evans assets, the IRS concluded that he had
On his tax return for year X, Evan reported $40,000 of taxable income.
After a review of Evan’s assets, the IRS concluded that he had $115,000 in cash, $300,000 in stocks, and $400,000 in real estate at the beginning of year X. At the end of that year his cash was at $75,000, his stocks at $350,000 and real estate at $425,000. The IRS determined that his living expenses in year X were $50,000.
1/Evan did not keep adequate records of his income or expenses in year X. How is the IRS likely to reconstruct his income for the year and what might they conclude?
2/What are the defenses that Evan might offer to the conclusions reached by the IRS?
Step by Step Solution
3.32 Rating (155 Votes )
There are 3 Steps involved in it
Step: 1
1 In the absence of adequate records the IRS may use indirect methods to reconstruct Evans income fo...
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
