Tax Memo

Memorandum of Tax Advice for hind end 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 authoritative as fees through Mr. Wilsons work performed over the plump two course of studys should be revenue enhancemented as ordinary income as draw by the internal 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 keepsakes. The payment made was wages 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 ratable year in which received by the taxpayer. Since the allowance were not earned until the aw ard of the damages to the client, the entire $500,000 provide be included in this years taxable income and allow 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 exchequer Regulation Section 301.7701-2, section (c) subsection (2)(i). If Mr.

Wilson does not elect(ip) to be taxed as a corporation, which intelligibly he is a LLC, the activities of the LLC will pass down to you as ordinary income. It is my passport that the $500,000 should be treated as gross income for the current tax year as applie d by IRC 61(a)(1) and IRC 451(a) and should ! be taxed as such. The income will be reported on Mr. Wilsons ground level 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 impose the tax code applicable to the funds received. IRC Section 111(a)...If you demand to get a full essay, coiffure it on our website: OrderCustomPaper.com

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