Tax Memo

Memorandum of Tax Advice for derriere and action Wilson October 22, 2012 MEMORANDUM To: John and Sue Wilson From: Date: October 22, 2012 ------------------------------------------------- Re: Tax Advice This is in reaction to Mr. and Mrs. Wilsons inquiries made in my office on October 22, 2012. The $500,000 real as fees through Mr. Wilsons work performed over the subsist two social classs should be tax incomeed as ordinary income as draw by the native blunt Code. Under Internal Revenue Code (IRC) 61, section (a) arm (1) stark(a) income is defined as payment for services, including fees, commissions, fringe benefits, and similar contingents. The payment made was pay for services and thus is considered gross income. IRC 451, section (a) states, the amount of any(prenominal) item of gross income shall be included in the gross income for the rateable year in which received by the taxpayer. Since the allowance were not earned until the award of the damages to the client, the entire $500,000 provide be included in this years taxable income and allow for be taxed as ordinary income as it was earned. As a single owner limited liability familiarity (LLC), your business is regarded as a disregarded entity as declared in treasury Regulation Section 301.7701-2, section (c) subsection (2)(i). If Mr.

Wilson does not choose to be taxed as a corporation, which intelligibly he is a LLC, the activities of the LLC depart pass down to you as ordinary income. It is my recommendation that the $500,000 should be treated as gross income for the current tax year as applied by IRC 6 1(a)(1) and IRC 451(a) and should be taxed a! s such. The income will be reported on Mr. Wilsons fix 1040 Schedule C, Profit or liberation from Business (Sole Proprietorship) and will be taxed as ordinary income afterward business exclusions and deductions. The year in which Mr. Wilson collected the $30,000 for recovery of expenses in regards to the settlement rank the tax code applicable to the funds received. IRC Section 111(a)...If you trust to get a full essay, coiffure it on our website: OrderCustomPaper.com

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