SCENARIO: You are a CPA with an office in NearLakes City and clients consisting primarily of professionals, entrepreneurs, and small business owners. John Smith, Esq., a practicing attorney with offices near yours, walks in your office and wants advice from you relating to a recent influx of cash he received as a result of winning a large jury verdict on behalf of his client in a personal injury case. His wife Jane Smith accompanies him during your meeting because she has some additional tax planning advice to ask of you.
ROLE: After reviewing John and Jane Smith's points of view, it will be your turn as a tax professional to decide on the best course of action from a tax perspective on their issues. Prepare a three page memo (at least
Why is this distinction important?
d. Would Jane (and John) realize better tax benefits if she had a separate business for her jewelry-making activities?
e. What tax benefits would John realize if he invested $15,000 in Jane's jewelry making?
f. Can Jane depreciate her vehicle or jewelry-making equipment? How?
3. John and Jane Smith tax issue:
a. Should John and Jane file separate or joint tax returns?
You Decide: It's your turn as a tax professional to decide on the best course of action from a tax perspective on their issues as presented above.
For each issue, begin by restating the issue and numbering as shown above [i.e., 1(a), 1(b), etc.]. Next, explain and discuss the tax rules that apply to the issue, which you gleaned from your tax research. Then, conclude with a definitive answer to the issue, supported by citations to the sources used. So for each issue, you should
1. state the issue;
2. explain and discuss the applicable law (IRC sections, regulations, court decision, and so forth); and
3. present your answer in the form of a concluding paragraph that refers to specific language from the IRC sections, regulations, court decisions, and other sources (if applicable) to support the conclusion.
*A template has been provided for your use in preparing this activity. Please use it!
Citations
Citations are required. You must provide citations whenever you refer to the sources of tax law used in this memorandum. You may cite your sources in numbered