Exclusions and Discharges of Debt
A new client approaches you and explains that after speaking to another tax preparer he is uncomfortable with the amount of gross income the tax preparer has calculated. Your new client explains that he asked the tax preparer for information on the following items but the tax preparer simply indicated that “he knows the Code”.
- Gain from sale of residence: The tax preparer included in gross income the gain from the sale of the residence. This is the first home the taxpayer and his wife have sold and the gain is $350,000.
- Combat pay: The tax preparer included in gross income the tax payer’s combat pay. The tax payer is considered noncommissioned personnel.
- Roth IRA distributions: The tax preparer included in gross income the tax payer’s Roth IRA distribution that had been in the account for seven years.
- Student loan forgiveness: The tax preparer included in gross income $10,000 of the taxpayer’s spouse’s student loan that was forgiven. The taxpayer’s spouse is a teacher.
Draft a memo for your new client expressing the purpose of the communication as well as interpreting multiple viewpoints of each of the items noted above. Make sure to use proper formatting for the memo. Utilize key terms and concepts from the situations described above to refine your search strategy. Write one to two paragraphs for each situation that:
- Identifies the Code Section that supports your argument and
- Explains why the itemisoris notconsidered gross income.
- Also, describe why the practice of a strict code of ethics and behavior is crucial in the accounting field, and how the choices you’ve suggested support an ethical course of action.
- Include an APA formatted title page.
- Make sure your paper is free of spelling and grammar errors, and links the client’s information to the code section as defined in your source. Use APA documentation style consistently to cite your sources.
