1. Let's put on our forensic accounting caps. Good detectives generally have to be able to think...

Question

1. Let's put on our forensic accounting caps. Good detectives generally have to be able to think like a criminal to help them solve crimes, not because the detective would act in an unlawful manner, but to understand the logic (or lack thereof) that occurs. A good tax accountant understands the law and how it may be applied to the taxpayer's advantage. There is a fine line between tax avoidance and tax evasion, however. When reading the chapters covering corporate taxation (Textbook is “Taxation of Individuals and Business”, Chapter 15-18), did you think of any examples that may be subject to misinterpretation or even abuse, but still within the law? The example(s) could be real or fictitious.

2. Many incorporated small businesses (one or very few shareholders) will create multiple entities for various aspects of operations. For example, a business owner of a printing company may have three corporations. One corporation that owns the building from which they operate, a primary corporation that reports operations and pays rent to the first company, and one distribution corporation that distributes materials to the operating company. You may see this type or a similar setup in practice quite often. Why do you think that these business owners were advised to set up multiple corporations? What do you feel are some issues that may arise from this approach?

3. Natsumi is a citizen and resident of Japan. She has a full-time job in Japan and has lived there with her family for the past 20 years. In 2009, Natsumi came to the United States on business and stayed for 240 days. She came to the United States again on business in 2010 and stayed for 120 days. In 2011 she came back to the United States on business and stayed for 120 days. Does Natsumi meet the U.S. statutory definition of a resident alien in 2011 under the substantial presence test? Explain your answer.

A total of 600 words (200 for each question)

David · Accepted Answer

Answers- 
1. The law may be abusive, unreal, or funny but if it gives a meaning it has to be followed. 
There are some lacunas in the IRS Tax code, some examples of which can be stated as 
under: 
a. Tax on illegal income: A crime under other laws may make a person liable to pay 
tax under US Tax Code. So a criminal dealing in illegal drugs may have to 
prioritize to pay tax to IRS on the illegal money he makes. Even though it may be 
a crime under some other US law, but IRS may claim taxes on to it. 
b. The Artist Deduction: This deduction allowed to performing artists looks more 
like an abuse. They are certain conditions imposed on to them for claiming such 
deductions and such conditions sound strange. An artist must be getting employed 
with at least two employers who pay such an artist at least $200 in income. And 
there adjusted total income should not exceed $16000. If they tend to fell in such 
conditions then they may claim art related expenses, paint cans, guitar picks, 
pointe shoes etc.

1. Let's put on our forensic accounting caps. Good detectives generally have to be able to think like a criminal to help them solve crimes, not because the detective would act in an unlawful manner,...

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