Memorandum to the Tax Research Manager: Casandra Rodgers Case (Essay Sample)

Memorandum
To: The tax Research manager
From: Tax Research Department
Date: March 26, 2016
Re: Casandra Rodgers case
I have received your memo regarding Cassandras upscale clothing store in the city. Following a critical analysis of her business ledger in the year 2015, it is clear that in the year 2014 she incurred costs in designing a logo as well as store signage for a cost of $48,300. The payment was not done all at once, instead, it was divided into 3 sections. She paid $5000 as an upfront fee that very same year, in the year 2015, she cleared the required $25,000, and is expected to clear the remaining balance in 2016.
In 2015, she employed a sales manager but had to cater for the cost of having his tattoo removed as it resembled the logo used by her competitive rival. In the year 2016, she received $75,000 as an advanced payment for an event to be held the following year. She is expected to submit designs for the events before February the following year failure to which 60% of the paid advance shall be reversed. It is also important to note that Cassandra donated some money as well cooperate bonds she inherited from her grandfather in the year 2009 to a women’s shelter operated by her sister.
Tax Issues
Casandra’s charitable donation to her sister’s women care and proper documentation of the trade and business expenses
It seems pretty clear that Cassandra made charitable deductions. Whenever an individual itemizes on their income returns at the federal level, there are deductions made to any donations made to a charitable qualifying organization. Note that a lot of taxpayers in the United States of America (U. S. A), disagree with the IRS in its denial that there are a lot of instances that it has made tax deductions in cases related to whether the organization donated to is a recognized and qualified charitable organization. Additionally, the IRS critically analyzes to see whether the donations made represent a good and fair market value as well as it being properly substantiated. Note, that the Casandra’s sister may sell the bonds at premium, with this Casandra may incur a commission. On the other hand, her sister may utilize the bonds coupons to facilitate the recurrent expenses of the shelter. If Casandra’s contribution to the charitable organization was allowed as a charitable donation at that amount, she would be able to deduct a fair market value. This is in accordance to [CCH Dec. 37,959(M), 42 T.C.M 27, T.C. Memo. 1981-280, (Jun. 8, 1981)] tax court memorandum on fair market value pertaining to contributions to charitable organizations. In Cassandra’s case, the bonds she donated in 2009 were worth $1000 and were approximately 3yrs down to maturity, the bonds having an expected yield of 2.3% and a semiannual coupon rate of 5. 75% by mid of July 2015 would be worth $1138.
Logo Design
It is also clear that in the year 2014, Casandra incurred $48,000 for the design of a logo as well as storage signage. There is also no surprise here as a lot of taxpayers fail to understand that for intangible assets, it is their sole responsibility to capitalize the amounts paid to different parties for such transactions. In the presented case, the intangible asset falls under a trademark, a franchise, or tradesmen and is well defined in 1. 197 – 2 (b). According to this particular section, it is made clear that amortization needs to be done on capitalized intangibles and once this is done there shall not be any other form of amortization in regards to that particular intangible asset. It is important to make it clear that the logo Casandra acquired is a trademark, a trademark is a name, a device, a word, or any combination of these that is used by a business to identify itself as well as its goods and services from others. The amortization of assets that fall under section 197 is a ratable 15 years and this begins on the first day of the month the intangible asset is acquired, in this case, the logo.
Advance Payments done for the Designing of Dresses
The dress designing business as well as the money Cassandra was paid in advance are also taxable. Stated in [631UST, 9284], the court ruled out that a dance studio was justified and liable to include cash by any negotiable note in a year’s gross income in which payments were received. Note that this payments are usually included in the receipt book of the year they got received. Installments made through contracts also fall in this particular category. For a tax payer on the accrual basis, it is not the receipt that determines the inclusion of the amount in net income but the right to receive. Therefore, if Cassandra uses the accrual method, she shall have to include in her income a particular advance paid to her in that particular year. If on the...