attached the fileJohn Johnson and his son, Joseph, own all outstanding stock of ABC Corporation....

Question

attached the fileJohn Johnson and his son, Joseph, own all outstanding stock of ABC Corporation. Both John and Joseph are officers in the corporation and, together with their uncle, Sam, comprise the entire board of directors. ABC uses the cash method of accounting and has a calendar year-end. In late 2011, the board of directors adopted the following legally enforceable resolution (agreed to in writing by each of the officers):  o Salary payments made to an officer of the corporation that shall be disallowed in whole or in part as a deductible expense for Federal income tax purposes shall be reimbursed by such officer to the corporation to the full extent of the disallowance. It shall be the duty of the board of directors to enforce payment of each such amount.  In 2017, ABC paid John $800,000 in compensation and Joseph received $650,000. On an audit in late 2018, the IRS found the compensation of both officers to be excessive. The IRS disallowed deductions for $400,000 of the payment to John and $350,000 of the payment to Joseph. The IRS recharacterized the disallowed payments as constructive dividends. Complying with the resolution by the board of directors, both John and Joseph repaid the disallowed compensation to ABC Corporation in 2019. John and Joseph have asked you to determine how their repayments should be treated for tax purposes. Joseph is still working as a highly compensated executive for ABC, while John is retired and living off his savings.  Prepare a memo for your firm’s client files describing the results of your research. Use the format below to prepare your memorandum. Use the tax resources available to by the University on Titanium (CCH and/or RIA Checkpoint.)Use Primary sources for your research in addition to treaties, etc. Minimum 500 words for this assignment Tax Research Memorandum Sample Format  Date TAX FILE MEMORANDUM  FROM: John Doe TO: Company TAX FILE SUBJECT:  Facts: Specific Issues:  Conclusion: Law and Analysis:  Preparer ________ 			Reviewer ________ 			Partner ________

Preeta · Accepted Answer

Tax Research Memorandum Sample Format 
Date
TAX FILE MEMORANDUM 
FROM: John Doe
TO: Company TAX FILE SUBJECT: 
Facts: In ABC Corporation, John Johnson and his son, Joseph is the sole shareholders, officers as well as the board of directors of the company with their uncle Sam. Cash method is followed by the company. The company adopted a specific policy in 2011, according to which if a salary amount paid to an employee gets disallowed in parts or as a whole from deductions, then that employee will have to reimburse that amount to the corporation to the extent of the amount disallowed. The board of directors will have the responsibility to ensure that the reimbursement is made to the corporation. So, Joseph and John are owners, officers as well as directors of the company.   
Specific Issues: In 2017, John received $800,000 and Joseph received $650,000 as compensation from ABC Corporation. In the audit of 2018, IRS found that the compensations paid were excessive and so disallowed some deduction from each of them. From John’s compensation, disallowed deductions was $400,000 and from Joseph’s compensation, disallowed deductions was $350,

John Johnson and his son, Joseph, own all outstanding stock of ABC Corporation. Both John and Joseph are officers in the corporation and, together with their uncle, Sam, comprise the entire board of...

Answer To: John Johnson and his son, Joseph, own all outstanding stock of ABC Corporation. Both John and Joseph...

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment