Fluent Essays

Instructions: You are the tax manager of Maximus & Smith CPA and have asked the two tax interns to prepare a research memo regarding the same client.  You provided each the same information about the client and are using this assignment as one of the indicators to help you decide which one to recommend for a full-time position. Review the following two research memos addressing the same question. Prepare the feedback you would offer each intern including what changes you would make if any to each memo in order to improve it. Be sure to include, which intern do you think did a better job on this assignment.Memo  to  file   To:  File   From:  Paul  Panther   Client:  Ben   Subject:  Divorce  decree       Facts   “Ben  and  Jennifer  were  divorced  two  years  ago  and  the  decree  stated  that  Ben  was  to  make   monthly  payments  to  Jen.  The  court  designated  $500  a  month  as  alimony  and  $600  per  month   as  child  support.  Ben  was  unemployed  for  a  quarter  of  the  year  and  paid  Jen  $  9,900  during  the   time  he  was  employed.  He  said  $5,400  was  for  child  support  and  $4,500  was  alimony.  In   addition,  Ben  transferred  home  theatre  equipment  to  Jen  with  a  FMW  of  $  3,300  and  a  basis  of   $6,000  in  exchange  for  her  promise  not  to  pursue  any  claim  against  him  for  unpaid  child   support  and  alimony.  During  his  three  months  of  unemployment  Ben  collected  $3,000  of   unemployment  benefits.  He  earned  $72,000  in  salary  for  the  nine-­‐month  period  of   employment.”     Issue  and  Conclusion   Can  Jennifer  accept  the  home  theatre  equipment  as  payment  for  the  unpaid  child  support  and   alimony?   Yes,  if  she  agrees  with  the  method  of  payment  then  it  is  possible.     Analysis  of  conclusion   A  former  spouse  can  agree  to  receive  property  as  a  form  of  alimony  payment  over  a  written   agreement  of  promise.  If  Jennifer  is  comfortable  with  the  offer  and  does  not  plan  to  pursue  any   claim,  she  can  use  the  written  agreement  as  proof  to  the  IRS  the  method  of  payment.                   Issue  and  conclusion   What  if  Jennifer  were  to  disagree  with  that  offer  and  decided  that  Ben  made  more  than  enough   money  over  the  year  to  give  her  the  remaining  unpaid  child  support  and  alimony.  Would  it  be   possible  to  pursue  any  claim  against  him?   Yes,  because  his  income  is  above  the  threshold  and  being  unemployed  for  3  months  does  not   give  him  the  right  to  not  pay.     Analysis  of  conclusion     Alimony  is  calculated  based  on  the  spouse  ability  to  pay  and  the  need  of  the  depending  spouse.   Since  Ben  made  $72,000  in  salary  for  that  year,  he  therefore  qualify  to  pay  the  unpaid  amount.     IssM em o to file T o : File F ro m : Paul P a n th e r C lie n t: Ben S u b je c t: D iv o rc e d e c r e e Facts Ben and Jennifer were divorced tw o years ago and the decree stated th a t Ben was to make m onthly payments to Jen. The court designated $500 a m onth as alim ony and $600 per month as child support. Ben was unemployed fo r a q u a rte r o f the year and paid Jen $ 9,900 during the tim e he was employed. He said $5,400 was fo r child support and $4,500 was alimony. In addition, Ben transferred home theatre equipm ent to Jen w ith a FMW o f $ 3,300 and a basis o f $6,000 in exchange fo r her promise not to pursue any claim against him fo r unpaid child support and alimony. During his three months o f unem ploym ent Ben collected $3,000 o f unem ploym ent benefits. He earned $72,000 in salary fo r the nine-m onth period o f em ploym ent. Issue and Conclusion Can Jennifer accept the home theatre equipm ent as paym ent fo r the unpaid child support and alimony? Yes, if she agrees w ith the m ethod o f paym ent then it is possible. Analysis of conclusion A fo rm e r spouse can agree to receive prope rty as a fo rm o f alim ony paym ent over a w ritte n agreement o f promise. If Jennifer is com fortable w ith the o ffe r and does not plan to pursue any claim, she can use the w ritte n agreement as p ro o f to the IRS the m ethod o f payment. Issue and conclusion W hat if Jennifer were to disagree w ith th a t o ffe r and decided th a t Ben made more than enough money over the year to give her the remaining unpaid child support and alimony. W ould it be possible to pursue any claim against him? Yes, because his income is above the threshold and being unemployed fo r 3 months does not give him the right to not pay. Analysis of conclusion Alim ony is calculated based on the spouse a b ility to pay and the need o f the depending spouse. Since Ben made $72,000 in salary fo r th a t year, he therefo re qualify to pay the unpaid am ount. Issue and conclusion Can Ben decided w hat portion o f the money is child support and w hat is alimony? No Analysis of conclusion If paym ent are required fo r both alim ony and child support by the court decree, then payments are firs t applied to child support and the remaining is alimony. The law says th a t when a m inor child is involve in a divorce, the need o f the child come firs t over all else. Therefore Ben did not have the a u th o rity to decide w hat portion o f the money goes to what.TO: File FROM: Stuart Student RE: Ben (tax year 2016) Facts Ben, a single taxpayer, divorced his wife, Jennifer. Through a court settlement between Ben and his former spouse, Ben paid Jennifer for alimony and child support. The separation decree included monthly payments made to Jennifer, where Ben pays $500 in alimony and $600 in child support. Moreover, Ben was unemployed for 3 months of the year and received a total of $3,000 in unemployment benefits. During the 9 months of Ben’s employment, he paid his former spouse $9,900 and stated that $4,500 was for alimony payments and $5,400 was for child support. As a result of his unemployment and lack of sufficient payment, Ben gave Jennifer his home theatre equipment to compromise for the missed payments during 3 months of his unemployment. The theatre equipment has a basis of $6,000 and a market value of $3,300. Furthermore, Ben made $72,000 in earned income during the 9 months of his employment. Issue and Conclusion 1 Can Ben deduct the alimony payments of $500 a month from his income? Can Ben deduct the $600 of child support payments from his income? Yes, Ben is allowed to deduct the $500 of monthly alimony payments that he makes to his former spouse. No, Ben cannot deduct the $600 of monthly child support payments. Analysis 1 Alimony payments are fully deductible towards the total income of the individual making the payments and are included in the income of the individual receiving the payments. According to Sec.215(a), alimony payments are deductible towards Ben’s income. Ben can deduce the $500 of monthly alimony payments made to his former spouse in the same year in which he makes the payments. Alimony is strictly defined in Sec.71 of the Internal Revenue Code. In order for the payments to be considered alimony, such payments have to be arranged under a formal divorce agreement. Ben’s cash payments to Jennifer were ordered by the court. Second, Ben and his former spouse cannot reside under the same house, meaning that they cannot file a joint tax return. Also, Ben is not liable for any payments after the spouse’s point of death. After analysis, Ben’s cash payments of $500 are considered alimony and completely deductible. Alimony is considered a For AGI deduction, therefore it is subtracted from gross income. The former spouse would have to give Ben her identification number (S.S number) in order for Ben to insert her S.S number in his tax return for the year the payments were made Sec.215(c)(1) and Sec.215(c)(2). This will allow the IRS to confirm the alimony payments by concluding that the former spouse did indeed receive alimony payments, which is included in her gross income. This means that Ben would have a lower Adjusted Gross Income (AGI), if everything else is held equal. The fact that his AGI is lower provides a tax benefit for Ben because most itemized deductions are off of AGI floor limits. The child support that Ben paTO: File FROM: Stuart Student RE: Ben (tax year 2016) Facts Ben, a single taxpayer, divorced his wife, Jennifer. Through a court settlement between Ben and his former spouse, Ben paid Jennifer for alimony and child support. The separation decree included monthly payments made to Jennifer, where Ben pays $500 in alimony and $600 in child support. Moreover, Ben was unemployed for 3 months of the year and received a total of $3,000 in unemployment benefits. During the 9 months of Ben’s employment, he paid his former spouse $9,900 and stated that $4,500 was for alimony payments and $5,400 was for child support. As a result of his unemployment and lack of sufficient payment, Ben gave Jennifer his home theatre equipment to compromise for the missed payments during 3 months of his unemployment. The theatre equipment has a basis of $6,000 and a market value of $3,300. Furthermore, Ben made $72,000 in earned income during the 9 months of his employment. Issue and C onclusion 1 Can Ben deduct the alimony payments of $500 a month from his income? Can Ben deduct the $600 of child support payments from his income? Yes, Ben is allowed to deduct the $500 of monthly alimony payments that he makes to his former spouse. No, Ben cannot deduct the $600 of monthly child support payments. Analysis 1 Alimony payments are fully deductible towards the total income of the individual making the payments and are included in the income of the individual receiving the payments. According to Sec.2 15(a), alimony payments are deductible towards Ben’s income. Ben can deduce the $500 of monthly alimony payments made to his former spouse in the same year in which he makes the payments. Alimony is strictly defined in Sec.71 of the Internal Revenue Code. In order for the payments to be considered alimony, such payments have to be arranged under a formal divorce agreement. Ben’s cash payments to Jennifer were ordered by the court. Second, Ben and his former spouse cannot reside under the same house, meaning that they cannot file a joint tax return. Also, Ben is not liable for any payments after the spouse’s point of death. After analysis, Ben’s cash payments of $500 are considered alimony and completely deductible. Alimony is considered a For AG I deduction, therefore it is subtracted from gross income. The former spouse would have to give Ben her identification number (S.S number) in order for Ben to insert her S.S number in his tax return for the year the payments were made Sec.215(c)(1) and Sec.2 15(c)(2). This will allow the IRS to confirm the alimony payments by concluding that the former spouse did indeed receive alimony payments, which is included in her gross income. This means that Ben would have a lower Adjusted Gross Income (AGI), if everything else is held equal. The fact that his AGI is lower provides a tax benefit for Ben because most itemized deductions are off of AGI floor limits. The child support that Ben pays his former sPerformance Statement: Discussion Board Posts Dimension/Task Fair Quality (5 pt.) Average Quality (8 pts.) 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