Tax accounting

Completed by tomorow

1.

 Draft a memo (no more than two double-spaced pages) that addresses separately the following three questions: 1. Sharmilla works for Shasta Lumber, a local lumber supplier. The company annually provides each employee with a Shasta Lumber shirt so that employees look branded and advertise for the business while wearing the shirts. Are Shasta’s employees required to include the value of the shirts in income? [Hint: See IRC Section 132 and Treasury Regulation 1.132-1.) 2. LaMont works for a company in downtown Chicago. The firm encourages employees to use public transportation (to save the environment) by providing them with transit passes at a cost of $250 per month. [Hint: See IRC Section 132.] a. If LaMont receives one pass (worth $250) each month, how much of this benefit must he include in his taxable income each year? b. If the company provides each employee with $250 per month in parking benefits, how much of the parking benefit must LaMont include in his taxable income each year? 3. Ultimate Comfort Blankets Inc. has had a great couple of years and wants to distribute its earnings while avoiding the double tax. It decides to give its sole shareholder, Laura, a salary of $1,500,000 in the current year. What factors would the courts examine to determine if Laura’s salary is reasonable? [Hint: See Elliotts, Inc. v. Commissioner, 716 F.2d 1241 (9th Cir. 1983)].

2. Draft a short (no more than two-page, single-spaced memo) responding to the following situation:
Vertovec Inc., a large local consulting firm in Utah, hired several new consultants from out of state last year to help service their expanding list of clients. To aide in relocating the consultants, Vertovec Inc. purchased the consultants’ homes in their prior location if the consultants were unable to sell their homes within 30 days of listing them for sale. Vertovec Inc. bought the homes from the consultants for 5 percent less than the list price and then continued to list the homes for sale. Each home Vertovec Inc. purchased was sold at a loss. By the end of last year, Vertovec had suffered a loss totaling $250,000 from the homes. How should Vertovec treat the loss for tax purposes? Write a memo to Vertovec Inc. explaining your findings and any planning suggestions that you may have if Vertovec Inc. continues to offer this type of relocation benefit to newly hired consultants.
Note the following suggested research precedents: Internal Revenue Code §82, §132(a)(6), §162, §1001(a), §1011, §1221; Rev. Rul. 2005-74, 2005-51 IRB, 1153, Rev. Rul. 82-204, 1982-2 C.B. 192; Corn Products Refining Co. v. Comr., 350 U.S. 46 (1955).