Reference no: EM131029818

Required:

Determine the most correct response to each of the following tax problems by consulting Checkpoint - the tax data base. Your answer mustbe TYPED in the format of a Research Memo (one for EACH case--see Memo example on p. 2-21 in textbook) and must include the following:

(1) Your reasoned conclusion to the problem;

(2) Citation (see p. 2-10 for formats) and description of the primarytax law sources applicable to this situation. You may NOT cite secondary sources for support (see your textbook if you don't know what this means)

Tax Research Case 1-

The taxpayer, a resident of California, appeared on a television quiz show and won a new sailboat. The producer of the program had paid $15,000 for the boat. However, the taxpayer had no interest in sailing and needed cash. The taxpayer visited several boat dealers to offer the boat for sale. She eventually sold the boat to a dealer for $12,000. The IRS contends the taxpayer's income from the prize is $15,000. Is the IRS correct?

Tax Research Case 2-

Carla Homebrew is a retired school teacher. On her income tax return last year she claimed a $4,000 medical deduction. The IRS, after audit, disallowed the deduction. Carla hires you, a tax expert, to advise her of her chances for success if she appeals the disallowance. She tells you that the $4,000 medical expense deduction represents the value of medical care which she rendered to herself. She did not pay any doctor for medical services, or pay for treatment at any hospital, nor did she pay for medical insurance. She contends that she is entitled to a deduction for insurance premiums for medical care because she can act as a self-insurer. Similarly she says that she should not be required to get treatment from either a doctor or a hospital and so may deduct the value of self-treatment. Also, she says that the IRS should have no right to force her to get treatment from medical practitioners as opposed to caring for herself.

Tax Research Case 3-

During the tax year, Warren Wolfe paid $12,000 for his daughter Barbara to go to college and travel during her vacation. Besides this amount, Barbara inherited $15,000 from the estate of her grandfather who died that year. Barbara bought a used sports car for $13,000 with her money and put the rest in a savings account. Warren claimed Barbara as a dependent on his tax return. When the return was audited, the IRS disallowed the dependency exemption, maintaining that since Barbara's total support was $25,000 ($12,000 from her father plus the $13,000 she spent on herself with her own money),Warren had failed to prove he furnished over half of Barbara's support.

Warren has asked you, as a tax expert, whether he should appeal this disallowance. He thinks the price of a car is not a type of expense which may be used to determine the support test of a dependent. How would you advise him?