Posted: April 25th, 2022

Income Tax Laws and Rules

Question description

Suppose you are a CPA hired to represent a client that is currently
under examination by the IRS. The client is the president and 95%
shareholder of a building supply sales and warehousing business. He also
owns 50% of the stock of a construction company. The remaining 50% of
the stock of the construction company is owned by the client’s son. The
client has received a Notice of Proposed Adjustments (NPA) on three (3)
significant issues related to the building supply business for the years
under examination. The issues identified in the NPA are unreasonable
compensation, stock redemptions, and a rental loss. Additional facts
regarding the issues are reflected below:
Unreasonable compensation: The taxpayer receives a salary of $10
million composed of a $5 million base salary plus 5% of gross receipts
not to exceed $5 million. The total gross receipts of the building
supply business are $300 million. The NPA by the IRS disallows the
salary based on 5% of gross receipts as a constructive dividendStock
redemptions: During the audit period, the construction company redeemed
50% of the outstanding stock owned by the client and 50% of the stock
owned by the client’s son, leaving each with the same ownership
percentage of 50%. The redemption was treated as a distribution under
Section 301 of the IRC by the IRS.Rental loss: The rental loss results from a building leased to the construction company owned by the client and his son.Use the Internet and Strayer databases to research the rules and
income tax laws regarding unreasonable compensation, stock redemptions
treated as dividends and related party losses. Be sure to use the six
(6) step tax research process in Chapter 1 and demonstrated in Appendix A
of your textbook as a guide for your written response.
Write a three to four (3-4) page paper in which you:
Based on your research and the facts stated in the scenario,
prepare a recommendation for the client in which you advise either
acceptance of the proposed adjustments or further appeal of the issue
based on the potential for prevailing on appeal.Create a tax
plan for the future redemption of the client’s stock owned in the
construction company that will not be taxed according to Section 301 of
the IRC.Propose a strategy for the client to receive similar
amounts in compensation in the future and avoid the taxation as a
constructive dividend.Use the six (6) step tax research
process, located in Chapter 1 and demonstrated in Appendix A of the
textbook, to record your research for communications to the client.Don't quote me high

Tags: Academic Paper Assistance, Assignment Help Australia, Cheap Essay Writing Service, Dissertation Writing Services