1. 
   Which specific part of the Internal Revenue Code defines “qualifying relative”?

 

 

1. Which Internal Revenue Code Section spells out the tax treatment for landlords (lessor) when they have improvements made by their tenants (lessee) on their rental properties?

 

 

1. We know from Chapter 6 that rental expenses are FOR AGI deductions. Find a Tax Court & Board of Tax Appeals reported decision in RIA Checkpoint that is about the deduction of the rental expenses of vacation home in 1981.

 

_______ v. ________                _____ TC ______

 

 

1. Where is “capital asset” defined in the code?

 

 

 

1. Find the case named “Singleton-Clarke v. Commissioner”. Summarize the reason why the taxpayer may deduct her MBA education as unreimbursed business expense (no more than 25 words).

 

 

 

1. IRC section 6672 contains one of the most severe penalties set forth in the Internal Revenue Code. The penalty serves as a major deterrent for taxpayers that fail to comply with their duty to withhold and submit payroll-related taxes. What is the penalty percentage on the amount of tax evaded under section 6672?

 

 

 

1. Read the supplemental material about primary/secondary sources of tax research and 2-15 through 2-17 in the textbook. What is the relative authoritative weight for IRS letter rulings, Revenue Procedures and Treasury Regulations?

 

 

 

Last year your client, the Rattameyers, were  featured on Surprise Home Makeover, a  network television show in which families are chosen to receive a “home  makeover” by a team of designers, paid for by the producers of the show. The  show sent the family to the DisneyWorld Resort in Orlando, Florida for one  week, while its team of designers, carpenters, and other construction  professionals ripped out substantial portions of their home and made  extravagant renovations for its television audience. The Rattameyers entered  into a contract with the producers of Surprise  Home Makeover in which they rented their home to the producers for one  week, in return for $50,000 rent, and an all-expenses paid trip to Disney World  for the entire family. The estimated value of the Disney World vacation was  $15,000. While the family was away, Surprise  Home Makeover’s team of designers essentially gutted the interior of their  home, and rebuilt it. All considered, the show spent approximately $250,000  renovating and remodeling the Rattameyers’ home. The producers assured the  Rattameyers that the rent they received is nontaxable since the rental period  was for less than 15 days. They also assured them that the value of the  improvements would not be taxable until they sell the house, because the  improvements were made by the producers as tenants. 

 

Now the Rattameyers have come to your office for preparing  their federal income tax return and on whether they should rely on the  producer’s word in terms of their gross income of last year that may or may not  be subject to federal income tax. 

 

You would like to help the Rattameyers in minimizing their  taxable income. However, based on your experience, you also know that the  Internal Revenue Service may not agree with the position that the rent and the  improvements on the house that the Rattamyers received are non-taxable. The  Service may assert that the producers were not renting the home to live in it,  but to use it as a backdrop, or studio, to film one week’s episode of the show.  The IRS may argue that the Rattameyers understated their taxable income last  year by $315,000, the value of the vacation, the cash rent and the value of the  home renovations transferred to them by the producers of Surprise Home Makeover. The Service’s contention may be that the  family received this payment in exchange for their agreement to be on the show  as compensation.

 

For the Rattameyers, you have researched the relative issues  in the RIA Checkpoint database. After determining the major IRC code sections  (what are they?) for this case, you also came across a document named Private  Letter Ruling 8104117 issued by the Internal Revenue Service. 

 

Your Task:

 

Please decide what you would recommend to the Rattamyers  about their income from the TV producer.  Be specific on each item (the rent, the  Disneyland vacation, and the renovation/remodeling).  In making your recommendations, you need to  explain to them:

 

 

 

a) What are the reasons for your decision?  Is your decision based on substantial  authority?  

 

b) If you decide that the items are not included in gross  income, what is the legal doctrine that may disallow your position by the  courts?  Can the taxpayer use the  above-mentioned private letter ruling in court if litigation with the IRS  arises?