|Muskrat News Legal Briefs
In Our Continuing Effort to Lower the Grading Curve, We present Yet Another EXAM ANSWER
Form 1049-EX: Federal Income Tax Exam
Please round each answer to the nearest dollar.
1. You are a law student living in North Carolina and studying at the Durham Drive-Thru Law School and Package Store. You do not work during the school year, and have no family. Next summer, between your second and third years of school, you will make $28,000 working at Hartebeest, Ibex, and Okapi, a law firm in New York. You pay $4,000 for rent while in New York, $3,500 for meals and entertainment, and purchase two new suits at the cost of $1,200 each. You get a ride with a friend to and from New York, but give the friend $20 for gas money each way. List all deductions from your income that you can claim.
A. The problem doesn't specify what tuition is, so it's hard to calculate the Lifetime learning credit.
1(a) That's a credit, not a deduction, bonehead.
A. OK, I can deduct the rent and the gas money but only half the value of the meals.
1(b) You have no job in NC, so the trip to NY does not count as business travel. Wrong, again, loser.
A. Looks like somebody's jealous of private lawyer's salaries, Mr. government-scale lawyer, commuting to work from Bethesda and carpooling with an agronomist from USDA.
A. Oh, I'm just kidding. C'mon, ask me another question.
2. In a Section 453 like-kind exchange, how is Qualifying debt relief in excess of the basis of the property exchanged handled when calculating taxable income?
A. As a cash payment in the year of the exchange, regardless of the presence of a down payment or not.
2(a) OK, Mr. Smarty-pants. What is the criteria for determining whether alimony payments in the first three post-marriage years are excessive enough, when compared to subsequent years, to be taxed?
A. Beats me. I'm not living in a studio apartment, trying to piece my life back together after my wife decided to "find herself" with the Guatemalan pool boy.
2(b) That's it! What are the federal sentencing guidelines applicable to filing a frivolous tax return, and by tax return, we mean "exam"?
A. You can't touch me. I'm all paid up.
3. Oh yeah? Was that comic-book collection you donated to the Squamash Public Library in 2002 really worth $5,000?
A. There were some rare ones in there!
3(a) And of course you kept a record of what they were, for the audit, bright boy?
A. Uhhhhh, I choose to exercise my right to file an amended return for the year 2002 and request an extended payment plan for any resulting additional taxes, penalties, and interest, as I am short on cash right now.
3(b) What about all that money you made at Wildebeest, Giraffe and Roadkill last summer?
A. That was a hypothetical!! I really worked for Brooklyn Legal Aid! I don't have the money - check my bank account- check my apartment!
3(c) Oh, we'll do more than that. Have you ever seen Papilllon? We have. Fire up the colonoscopy machine, boys.
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