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This addresses cases from South Western federal taxation.

TOO MUCH OF A GOOD THING
Clark, a prospective new client, visits your office on March 12, 2011. He wants you to prepare a Form 1120S for 2010 for his washateria, wash clean, an S corporation. Clark owns at least six different businesses in your community and has a reputation of being a risk taker and an operator. He provides you with the financial data prepared monthly for wash clean by a local bookkeeping services. He hopes to file the S corporation return by March 15 to avoid any problems with the IRS. Clark also is the president of the Champer of commerce.

In the preparing the form 11205, you note that the net income for wash clean for exceeds that of several other washateria clients. About a month ago one of your golfing companions mentioned that he had heard that wash clean was laundering more than clothes.

Based on what you know about Clark, determine the scenario or stipulation(s) in which you would accept Clark as a client.
Illustrate with specific words and sentences you would say to Clark to propose your stipulation(s).

NOL carryover
John timely filed his 2007 and 2008 federal income tax returns reporting AGI of $90,000 and 100,000 respectively. For the years 2009 and 2010 john had NOLs of $25,000 and $40,000 respectively. Because john had NOLs for 2009 and 2010, he did not file tax returns for those years. In 2011, john has taxable income, so he is considering using his NOLs from 2009 and 2010 to offset his income for 2011.

Evaluate John's plan for tax year 2011.
Discuss whether or not you agree with John's actions in 2009 and 2010.
Evaluate if not filing a tax return is ethical.

Solution Preview

Based on what you know about Clark, determine the scenario or stipulation(s) in which you would accept Clark as a client.
Illustrate with specific words and sentences you would say to Clark to propose your stipulation(s).

-The basic facts are that he wants to file by the 15th and he is the president of the chamber of commerce. His net income was high for the industry, and someone makes a comment that he may be involved in illegal activity. I more than likely would not accept him as a client. It would be too much of a business risk for me, based on the fact that there is suspicion that illegal activity is taking place. If I worked for a firm and they said that we had to accept him as a client, the first ...

Solution Summary

The solution provides a detailed discussion for each case presented, analyzing the issues and providing relevant facts to solve each case.

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