The tax projects will involve research and/or preparation of tax returns both manually and on the computer.These assignments will be announced and you will be given several weeks to complete them.In addition, students will be expected to prepare a written memorandum analyzing a complex tax issue.In preparation of this memorandum, students will be expected to utilize CCH’s tax research software and other tax/legal databases.A written memorandum will be required detailing the tax and legal issues of the case.All relevant source material, including case law and IRS pronouncements should be referenced in developing your analysis.Late assignments will receive a reduction in score of one latter grade.Assignments over two weeks late will receive a reduction in score of two letter grades.
assignment isbelow
Grace Lang was employed as a waitress at the Pancake House in Grand Bay, Alabama.While working the morning shift on March 7, 2012, one of Grace’s customers left her a Florida lottery ticket as a tip.When Grace discovered that the ticket had won part of the Florida Lotto jackpot, the following steps were taken.
·Upon advice of her father and legal counsel, the Lang Corporation was formed and immediately made an S election.
·Grace received 49% of the stock in Lang, and the 51% balance was distributed to family members.
·Grace had the Florida gaming authorities designate the Lang Corporation as the recipient of the prize money – approximately $10 million payable over 30 years.
·Grace’s coworkers at the Pancake House filed suit against Grace based on an agreement they had to share any lottery winnings equally.The Alabama courts eventually decided that such an agreement did exist but that it was not enforceable.(Alabama law does not permit enforcement of contracts involving illegal activities – gambling is illegal in Alabama.)
In 2020, the IRS determined that Grace had made taxable gifts in 2012 when she shifted some of the lottery winnings to family members.She made the gifts by having 51% of the Lang Corporation stock issued to them.(Because Lang is an S corporation, gross income from the lottery passes through to the shareholders.)
Grace disputed the gift tax assessment by contending that her actions were required by the Lang family agreement.Under this agreement, it was understood that each member would take care of the others in the event he or she came into a “substantial amount” of money.Because Grace was bound by the Lang family agreement, she was compelled to relinquish any right to 51% of the Lang stock.Thus, the satisfaction of an obligation is not a gift.As no gift occurred, the imposition of the gift tax is not appropriate.
Who should prevail? Who’s going to win?
Instructions.
You are working for a CPA firm and are asked to do research and prepare a 1-2 page client file memorandum showing your findings.This is due during the scheduled final examination and you must be prepared to present your findings.You
must
use CCH IntelliConnect through the Rowan University library resources.
Partial list of research aids:
Estate of Emerson Winkler, 36 TCM 1657, T.C.Memo. 1997-4.
Tonda Lynn Dickerson, 103 TCM 1280, T.C.Memo. 2012-60.