Chapter 1, Problem 18P

Mrs. Smith, the legal wife of Mr. Smith who is the city treasurer of Baguio, provided an information to the Bureau of internal revenue unpaid taxes leading to the recovery of P9,500,000. REQUIRED: 1. How much is the net amount to be received by the informant after deduction of final taxes?

You are a CPA and do tax returns for individuals. A woman enters your office and asks you to complete her tax return. During your meeting, she mentions that she is expecting about $5000 in refund, and needs that to pay off a debt, that will result in a $1000 fine if she does not pay in the next month. You complete her tax return, but the refund is much lower than she expected, only $1000. She is very mad, and consults with another CPA. The other CPA determines that you made a significant mistake, but the period to file returns has passed. It will cost $500 to file an amendment. What damages is the woman likely entitled to? Group of answer choices A. None, because accountants can't be perfect B. $500, because that is all that is needed to make it right C. $500, and potentially $1000, because of the consequential damages of not being able to pay off her loan on time D. $4000, because that is the difference between the proper refund and your mistake.

Andy Simmons is a CPA with his own accounting and tax practice. He occasionally does an audit for small business clients. One day an audit client shows Andy a letter from the local Property Tax Assessor’s office. It seems the client inquired about the process to be followed to appeal the 20 percent increase in his property taxes. He already wrote an appeal letter and was denied. The letter said that most folks who appeal those decisions hire a CPA to represent them before the administrative board in property tax assessment hearings. If your client asks you to represent him in the appeal process, can you do so under the AICPA Code? Explain.

You are the accountant for the Millenium Corporation. Last year the company purchased a $2,500,000 corporate jet to be used for executive travel. To help offset the cost of the airplane, your company occasionally rents the jet to the executives of two other corporations when it is not in use by Millenium.When the corporate tax return was filed this year, you began depreciating the jet by using MACRS. Today you received a letter from the IRS informing you that because your company occasionally rents the airplane to others, it is considered a commercial aircraft and must be depreciated as such. The corporate lawyers are considering disputing this IRS ruling and have asked you the following questions: How much depreciation did you claim this year? 2,500,000x.20= $500,000 claimed in depreciation this year  Under the new category, how much depreciation would be claimed? 2,500,000x.1429= $357,250 claimed in depreciation in the new category If the company pays 30% income tax, what…

The treasurer of New Semiconductor has a problem. The company has just ordered new assembly robotics for $3,500,000. The manufacturer would install the robotics for an additional $50,000. The treasurer does not know whether the Internal Revenue Service (IRS) will permit the company to treat this installation cost as a tax-deductible expense (end of Year 1) or view the installation as part of the capital investment. In the latter case, the company would capitalize the installation cost and depreciate the $50,000 along with the cost of the robotics according to the 5-year MACRS tax depreciation schedule: Year 1: 20% Year 2: 32% Year 3: 19.2% Year 4: 11.52% Year 5: 11.52% Year 6: 5.76% Assuming the tax rate is 35% and the discount rate is 5%, calculate: 1) the present value of the tax shields if the installation costs are expensed at the end of Year 1, and 2) the present value of the tax shields if the installation costs are capitalized and depreciated according to 5-year MACRS. a.…

Marvin is a state legislator. Bases on his belief that a certain infrastructure project in the public’s best interest, Marvin in favor of the project. Several weeks later, a contractor who financially benefited from the project approaches Marvin with an envelope full of cash and thanks him for his “public service.” If Marvin accepts the cash, which of the following best describes his violation? A. Official bribery. B. Commercial bribery. C. Illegal gratuity. D. Economic extortion.

Janet Starr, a CPA in Baltimore, received the following request from a former client, South Shore Swim Club (S.S.S.C.): "Please send me copies of my 2016 tax return, the original set of sales receipts I provided you in 2017, plus copies of all our email correspondence related to the 2017 returns. Thank you." S.S.S.C. has not paid Ms. Starr all of the fees owed to her for her work preparing and filing their 2016 tax returns.  According to the AICPA Code of Professional Conduct, Janet Starr must: Select one: send SSSC the 2017 tax return but not the receipts or copies of the emails.  send SSSC the sales receipts but not the tax return or the emails. send SSSC all of the requested items. send SSSC the 2017 tax return and the receipts but not the emails.

A concerned government employee furnished the BIR a statement detailing the improper tax practices of a corporate taxpayer. The information was instrumental to the collection of P500,000 tax. How much informer's tax reward after tax shall be released to the informant?

Your new client, Ms. X, had her 2018 tax return audited last year and found the whole experience so painful that she never wants to take a chance on ever having to deal with the IRS again. (She should have hired you to help defend the audit, but didn’t.) Specifically, she lost a very big part of her research tax credit because the IRS reclassified a large category of expenses that she had included in calculating the credit as “not sufficiently research-related.” As to her 2019 return, you note that Ms. X has even more expenses in that same category, meaning that her tax credit would be much larger if they were included in the calculation. And, more importantly, you’re aware that a Tax Court decision from earlier this year held, in another taxpayer’s almost identical circumstances, that the very same category of expenses was properly included in the research credit calculation. Can you, or should you, advise Ms. X that her own expenses in this same category can be used to her benefit in…