Textbook Assignment: I: 15-61 & I: 15-62

Textbook Assignment: I:15-61 & I:15-62


Textbook Assignment: I:15-61 & I:15-62
I:15-61 Tax Strategy Problem
HPU, Home Products Universal, is examining expanding to having its own home improvement centers. The IRS is disputing the deduction of $150,000, a consulting fee regarding the expansion. HPU wants to file a lawsuit and is deciding which judicial forum to file with, US district court, Tax Court, or US Court of Federal Claims.
Home Products Universal (HPU) should file a lawsuit against the IRS using the Tax Court. HPU would not use the U.S. District Court because the company sells products throughout the entire country.   Since each state has a separate U.S. District Court, the decisions of each state may not be compatible.   The Tax Court has national jurisdiction and only deals with tax-related cases.
The U.S. Tax Court is the only medium HPU can use to dispute this tax case and avoid paying the $150,000.   This is because the U.S. Tax Court can handle disputes that happen before the IRS makes a decision regarding a formal tax. If HPU chose to use U.S. Court of Federal Claims or the U.S. District Court, the company would have to pay the taxed amount before filing a lawsuit.
I:15-62 Case Study Problem
During an IRS audit of Mal Manley’s taxes for the previous years, Manley is claiming a contribution of $25,000 instead of the $24,785 he filed, the IRS has denied 75% of his previous contributions for lack of proof.
Statements on Standards for Tax Services No.3 stated that a CPA "may in good faith rely, without verification, on information furnished by the taxpayer or by third parties” (Pope, Anderson, & Kramer, 2010).   Therefore, Mal Manley’s information at face value can be accepted.   Manley’s increase in adjusted gross income of over $30,000 may explain his increase of approximately $10,000 to charitable contributions.
For the second scenario, the provision form Statements on Standards for Tax Services No. 3 noted that a CPA should...