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The date is April 14, and Helen Balwin, CPA tax practitioner,
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The date is April 14, and Helen Balwin, CPA tax practitioner, sits at her desk, pondering the tax return

 

before her. Helen has spent plenty of time pondering during the past year since moving from her home

 

in a large eastern city to set up her new tax practice in a small western town. Clients in this small town

 

have not exactly beaten a path to Helen?s door to take advantage of her services. Building a client base

 

has proven much more difficult than she had anticipated. The return in front of Helen was completed on

 

behalf of her newest client, Billy Joe Carter, who owns Honest Bill?s Used Car Lot. He is a cousin of half of

 

the members of the town council and is very influential in the local business community. Establishing a

 

client relationship with Billy is the break that Helen has been looking for. In fact, Billy has made it clear

 

that if Helen can complete and file his return before the April 15 deadline, Helen will receive his tax

 

return business, as well as that of his family, for year to come. Of concern to Helen, however, are several

 

items on Billy?s return. Billy insists that he is entitled to a business deduction for his new four-wheel drive

 

truck, since he uses it 100% of the time for business errands (such as traveling to car auctions, picking up

 

parts, etc.). Helen thinks she has seen Billy driving the truck a number of times on what appeared to be

 

personal trips. Also, Billy insists that the expenses associated with several trips to Las Vegas are

 

deductible since the trips were ?primarily of a business nature.? Billy also claims several other large

 

deductions without offering what Helen would consider to be ?substantial documentation.? As if

 

anticipating Helen?s skepticism, Billy said, ?I don?t know how things were in the big city where you came

 

from, but around here people believe that a person?s word is worth something. You?ll just haveto trust

 

good old ?Honest Bill? this year, and next year I?ll try to keep some better records.?

 

A.What are the ethical issues in this case?

 

b.Research the tax code that for substantiation requirements. Print out a copy of the page or pages

 

(maximum 2 pages) where you found your answer, highlight the pertinent information. (Print Screen

 

and link Is ok)

 

c. Go to the IRS website, locate the publication related to substantiation requirements. Print out a copy

 

of the page or pages (maximum 2 pages) where you found your answer, highlight the pertinent

 

information. (Print Screen and link is ok)

 

d. Who and what are the stakeholders who will be affected directly or indirectly by inappropriate

 

decision on Helen?s part?

 

e. What are Helen?s options in this situations?

 

f. What do you recommend that Helen do?

 

2.

 

A. Research the temporary regulations that provide the 7 tests. Print out a copy of the page or pages

 

(maximum 2 pages) where you found your answer, highlight the pertinent information. (Print Screen and

 

Link is ok) b. Who writes the Internal Revenue codes? Who issues the Regulations in regards to taxes? What are

 

final, temporary, and proposed regulations?

 

c. Go to the IRS website, locate the publication related to substantiation requirements. Print out a copy

 

of the page or pages (maximum 2 pages) where you found your answer, highlight the pertinent

 

information. (Print Screen and link is ok)

 

3. In 2007, Tyler Tomey (548-55-9234) paid $135,000 for a condominium that he uses as a rental

 

property. In 2012, he spent $37,000 furnishing the condo. He uses regular MACRS to depreciate the

 

furnishings. In 2012, Tyler deducted 50% of the cost of the furnishing as a bonus depreciation. The half

 

-year convention applies to the furnishings. During 2015, Tyler received $15,000 in rental income and

 

paid the following expenses:

 

Associations dues $2,800

 

Insurance $350

 

Mortgage Interest $7,460

 

Real Estate taxes $1,400

 

Repairs $760

 

Utilities $360

 

The property is located at 5505 West End Road #5, Farmington, IN 46883. Tyler actively participates in

 

the rental activity. His AGI before considering the above income and expenses is $141,400. He

 

depreciates the condominium using MACRS.

 

Required:

 

?Prepare Schedule E for Tyler.

 

?Prepare Form 8582 for Tyler

 

Note: Prepare Schedule E and Form 8582 by hand, scan and attach them to your paper.

 

Show your detailed calculation, or your work (particularly for depreciation).

 







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