The taxpayer performs services with payment due from

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The taxpayer performs services with payment due from the customer within 30 days. All customers pay within the time limit.
What would be the benefit to the taxpayer using the cash method of accounting rather than the accrual method?
a. Would it matter, after taxes, whether Wade sells the car and gives the money tohis daughter or whether he gives the car to his daughter and she sells it for $13,000? Explain.b. Assume that Wade gave the car to his daughter after he had arranged for another person to buy it from his daughter. The daughterthen transferred the car to the buyer and received $13,000. Who is taxed on the gain?(LO 3, 5)
b. Undoubtedly, the IRS would argue that in substance, Wade sold the car and Wade should be taxed on the gain. However, if hisdaughter did not receive the property with a binding commitment to sell it, she would be the taxpayer on the sale.Anita, a cash basis taxpayer, sued her former employer for wage discrimina- tion. Her attorney agreed to pursue the case ona contingent fee basis—the attorney would receive one-third of any settlement or court award. The parties reached asettlement, and the attorney for Anita’s former employer wrote a check payable to Anita for $320,000 and a check payable toher attorney for $160,000. Anita reasons that she and the attorney were partners in the lawsuit who shared profits two-thirdsand one-third, respectively. Therefore, she includes $320,000 in her gross income. Is Anita’s analysis correct? Explain.

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Term
Fall
Professor
PhilO'Reilly
Tags
Taxation in the United States

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