You are a CPA working for ODU Alumni CPAs, LLP. Yesterday, you attended a Columbus Crew soccer match with a client who posed a question to you. The facts are as follows: Your client, Molly Dunphy, just got her realtor’s license. She has been talking to other reattors in the area who have shared with her that since her image is part of her job, she can deduct the following as business expenses on her Schedule C against her commission income from home sales: • Business suits worn only for work and kept in a separate area in her home • Dry cleaning of her business suits – Jewelry worn only for work • Makeup • Haircuts • Manicures • Teeth whitening • Personal trainer • Continuing education classes to maintain realtor’s license • Mileage from office to houses that are being shown and back (but not commuting mileage from Molly’s home to the office and back) Molly is not sure if this is correct, but her new colleagues state they deduct these items every year because these are all ordinary and necessary expenses of being a realtor. Molly wants to file her taxes correctly. What do you advise?
1. Draft a tax memo outlining the deductibility of the items listed on Molly’s Schedule C, where she reports her commission income as a realtor. Follow Exhibit 2-9, Sample Internal Research Memo, in your textbook on page 2-21. Use at least one Internal Revenue Code section and at least one tax court case in your analysis (and list all sources used in the authorities section).
2. Draft a letter to Molly Dunphy summarizing your conclusions with respect to the items listed above. Follow Exhibit 2-10, Sample Client Letter, in your textbook on page 2-22
COURSE MATERIALS (REQUIRED) Spilker, Brian; Ayers, Benjamin; Barrick, John; Outslay, Edmund; Robinson, John; Weaver, Connie; Worsham, Ron, Taxation of Individuals and Business Entities, 2019 Edition, McGraw-IiiIVIrwin, New York, NY, 2019. ISBN# 978-1-259-91839-1
Distributed: Wed, 03 Jan 2018 Proportion investigation is a helpful instrument for breaking down fiscal reports. Figuring proportions will help in understanding the organization's technique and in understanding its qualities and shortcomings with respect to different organizations and after some time. They can in some cases be helpful in distinguishing income the executives and in understanding the impact of bookkeeping decisions on the company's accounted for gainfulness and development. At long last, the proportions help in getting a superior comprehension of a company's present benefit, development, and hazard which can enhance figures of future productivity and development and assessments of the expense of capital. In inspecting the fundamental budgetary proportions, we will look at the proportions of Best Buy for the monetary years finished March 2, 2002 and March 3, 2001. Extracts from Best Buy's fiscal reports are incorporated toward the finish of this archive. Best Buy is a developing organization. The accompanying table mirrors the development in deals and salary amid the year finished March 2, 2002: Reference: http://www.docstoc.com/docs/4290867/ascertaining proportions Various bookkeeping proportions are utilized to quantify diverse parts of execution. Huge numbers of these are gotten from a solitary proportion known as the arrival on legislative center utilized. Any business would need exceptional yield on their legislative hall as this is the arrival on of speculations made. Yet in addition they need the arrival to be as high as conceivable against their rivals. On the off chance that we take a gander at the aftereffects of Marks and Spencer over the five years the ROCE tumbled from 24.88% to simply 14.44% that is a fall of 10.44% notwithstanding. Contrast that with the ROCE of next which was 65.54 in 2005 and it remained around until 2008 when it went upto 84.73 anyway in 2009 that figure boil down to only 40.10 in 2009 in spite of the enormous fall Next appear as though they are beating imprints and spencer on the arrival of the capital contributed All organizations need to get as high benefit as conceivable imprints and spencers net overall revenue over the time of five years it has been steady if will take a gander at somewhere in the range of 2006 and 2008 the gross net revenue remained around 38% that figure saw a fall of just shy of 1% in 2009 anyway stamps and spencer is improving the situation than Next as the gross net revenue of next is bring down that m&s and looking at over the five years they keep on encountering a fall in gross net revenue yet between 2007 (27.77) and 2008 (28.51) they encountered an expansion of just shy of 1% in 2009 that did not enhance since it began to fall again lower than 2008 The net revenue of m&s was turning was solid upward until 2009 as in 2008 it was 12.51 up from 9.38 in 2005 so it was great period anyway in 2009 that figure was 7.79 lower than the net revenue of 2005. all the more worryingly for m&s next is beating them over the five years not exclusively are they getting high net revenue yet additionally it is steady at around 14% somewhere in the range of 2005 and 2008 Deals per worker The advantage turnover is the means by which well the firm is giving its benefits something to do. The proportion shows that the benefit turnover of Next is better that M&S in the event that we analyzed somewhere in the range of 2005 and 2008 anyway m&s appear as though they made progress in 2009 when their advantage turnover was 3.41 up from 1.74 in 2008 contrasted this with next in 2008 Next's benefit turnover was 5.66 this was higher than m&s 2008 resource turnover yet in 2009 next that figure tumbled down to simply 3.06 and this lower than m&s on the off chance that we thought about that year. The stock turnover of m&s has been encountering descending pattern in the previous five years the 2005 stock turnover was 23.38 yet continouos fall in the following four years implied m&s stock was turning over 16.91 anyway the diminishing in stock turnover m&s will be empowered that their rival next is doing most noticeably awful than them as their stock turnover was simply 10.27 Account holders turnover and indebted individuals gathering period This proportion demonstrates the speed with which indebted individuals/accounts recievable are being gathered, along these lines it is characteristic of productivity of exchange the executives. The higher the proportion and shorter gathering period the better the exchange credit the executives and the better is the liquidity of the indebted individuals and visa versa. we can see that the control of credit working by M&S is obviously better than Next. The borrowers' turnover being 108.53 and the indebted person accumulation period being roughly 3 days contrast with 5.77 for the account holders turnover and 63 days for the indebted person gathering period for Next. Organizations typically work on a 30, 60 or 90 days arrangement as far as obligation of installment. Leaser gathering period This proportion mirrors the time it takes the organization to pay its providers. In this way, the more you can hold off installment the more you have money on transfer. We can see that the loan bosses accumulation period is low (around 14 days) contrast with straightaway (roughly 22 days) to pay their obligations. So stamps and spencer should need to look in to methods for enhancing association with providers so they have enough time to pay them. Current proportion The present proportion is the proportion of aggregate current resources for aggregate current liabilities. The present resources of a firm speaks to those which can be in the normal business, changed over in to money inside brief timeframe. Imprints and spencer current proportion diminished in the previous five years from 0.65 in 2005 to 0.60 in 2009 and the organization is beneath the national normal which is 1.8:1, next is improving the situation than m&s despite the fact that they are additionally still underneath national normal with a present proportion of 1.54:1 in 2009 yet that is a long way from national normal like m&s. Analysis this proportion determines whether your present resources that could be immediately changed over into money are adequate to cover current liabilities. As of not long ago, a Current Ratio of 2:1 was viewed as standard. A firm that had extra adequate snappy resources accessible to leasers was accepted to be in sound money related condition. Again simply like the present proportion the two organizations are working underneath the national normal. M&S analysis did not demonstrate much enhancement in the course of recent years in the event that we contrast it with next in a similar period 2005 of the two organizations was 0.39:1 for M&S and 0.82:1 for next nonetheless in the event that we look the distinction between the two organizations m&s is 0.37:1 lower than 2005 yet next is enhancing marginally with basic analysis of 1.09:1 in 2009. Outfitting proportion The outfitting proportion mirrors the measure of back brought from the banks up in connection to the aggregate capital utilized. In the event that the outfitting proportion is around 40% it is impossible that a bank would make any further credits. We can see that the two organizations are far over the 40% and in this manner despite the fact that they have great notorieties it might cause a few issues while getting advance. This truly should be taken a gander at and M&S must be worried about this. Nonetheless, expansive organization for the most part work over this rate. Reference: http://www.scribd.com/doc/19208907/Financial-Analysis-of-IDEA Section 3 UK is going through a solid monetary downturn and generally speaking spending by the purchasers is reliably diminishing. The monetary development of UK in the course of the most recent three years is gradually and reliably decliningwith conjectures for negative development in 2009 and some recuperation in 2010. These patterns additionally show that pretty much every segment of the economy will be influenced with the back off in the customer spending because of credit crunch.>GET ANSWER