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Maximizing the tuition deduction, Whose office is it?

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I have the following assignment that I need help completing:

Maximizing the Tuition Deduction

Blake maintain a household that include his daughter bianca who is 23 years old and a full time student. using funds from a savings account she inherited from her aunt, Bianca pays for her $5000 college tuition. For the year, Blake properly claims Bianca as a dependent (under the qualifying child category) and, making use of 222, deducts $4,000 of the tuition. On her own income tax return, Bianca also use 222 to deduct the 1,000 balance of the 5,000 tuition.
- Explain what Blake and Bianca might be trying to accomplish.
- Determine whether or not they have acted properly. Discuss any ethical concerns related to this treatment.

Ethics and Equity: Whose Office Is It?

Gene and Mary are married, and both work at home. Gene is self-employed, while mary is employed. They have set aside 20 percent of the living area of their residence for an office that they both use. On a joint return for the year, the full office in the home expenses are deducted on Gene's schedule C (profit or loss from business), while Mary's form 2106 (employee business expenses) contains no such deduction.
- Discuss what Gene and Mary might be trying to accomplish.
- Evaluate if Gene and Mary acted properly.

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Solution Preview

Maximizing the Tuition Deduction

- Explain what Blake and Bianca might be trying to accomplish.
- Determine whether or not they have acted properly. Discuss any ethical concerns related to this treatment.

They're both trying to use the same deduction to receive the tuition deduction credit. First of all, she's 23, so it's likely that she's still an undergraduate in college (as opposed to a graduate student, which would be a different credit.) The American Opportunity Credit would serve them better than the tuition deduction credit. I am not sure why they're referring to 222. The forms used are either the 8917 or 8863, depending on the credit taken. Bianca can't claim $1,000 of the credit. It will be rejected as soon as the IRS receives ...

Solution Summary

The solution discusses both cases presented below from the ethics sections of Federal Taxation. Both scenarios are fully addressed.

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See Also This Related BrainMass Solution

Chapter 7 Bankruptcy

During the decade of the 1990s, business and personal bankruptcies soared. This happened in spite of the greatest economic boom in US history. It was also a boom time for lawyers specializing in the intricacies of bankruptcy law. In 1998, a record 1.4 million businesses and individuals filed for protection under the bankruptcy code, a 300 percent increase since 1980. Ninety-six percent of the filings were personal bankruptcies; however, in 1999, the number dropped 8.5 percent.

Many analysts attribute the high number of bankruptcies to aggressive credit offers by banks and, to a lesser extent, department stores. These companies lure even the most credit challenged (young people and those who have problems managing money) into accepting their credit cards, sometimes offering secured lines of credit, where the cardholder places as little as $100 in a savings account and receives a line of credit five times that amount.

Another reason cited by analysts for the increase is that the old stigma associated with bankruptcy-if you filed for bankruptcy protection, you were somehow inferior and to be looked down upon-no longer exists in most areas of the country. A third reason is a change in attitude of the credit cards issuers. Not long ago, if an individual filed for bankruptcy, that person was unable to obtain credit for years (a bankruptcy filing remains on your Credit Bureau file for 10 years). Today, however, credit card companies operate on a different premise. If you have recently filed for bankruptcy, you are no longer in debt. Therefore, you must have sufficient cash flow to service new debt. Within a month of filing, your mailbox will be flooded with credit card offers.

In the business arena, filing for bankruptcy-stopping creditors from taking legal action-has evolved into just another business strategy.

The three most common types of bankruptcy are:

Chapter 7: The bankrupt's assets are sold to pay creditors, and creditors have no right to the debtor's future earnings.

Chapter 11: A business continues to operate and creditors receive a portion of both current assets and future earnings. This form of bankruptcy is also available to wealthy individuals. (See Wards.com)

Chapter 13: For the typical consumer, where creditors usually receive a portion of the individual's current assets and future earnings. Although bankruptcy laws are sometimes abused (an individual may file personal bankruptcy every seven years and some individuals do exactly that), bankruptcy is designed as a safety net for businesses or individuals who experience financial difficulties for whatever reason.

QUESTIONS:

Who may file Chapter 7 bankruptcy? How has this changed over the past year?

What are some of the reasons people file bankruptcy?

How does bankruptcy affect interest rates on loans? Credit cards?

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