Instructions: Due Sunday 03/23
At least 2 pages long with 3 peer-reviewed references.
G-1Frances moved in with her mother, Beatrice, when Beatrice’s health started to fail. Frances cared for her mother as a devoted child would and never expected anything in return. When Beatrice needed to move to a nursing home, she legally transferred the home to Frances for $1,000 and “other valuable consideration.” The house had cost Beatrice $50,000 many years ago, and on the date of the transfer it was valued at $150,000. At the time of the transfer, Beatrice was insolvent, as she owed the IRS $250,000 in back taxes and interest for several years. A few months after the transfer of the house, the IRS filed a notice of federal tax lien for Beatrice’s unpaid taxes. The IRS has filed against Frances for $150,000 of her mother’s taxes, as Frances is in possession of the only valuable asset Beatrice has owned. Can the IRS collect taxes from Frances?
G-2The IRS audited the Loser Corporation’s return filed two years ago. The IRS found substantial under-reporting of income and is proposing to review Loser’s returns for the six prior years. Loser knows it underreported its taxable income on its timely filed tax return five years ago. It reported $80,000 of gross sales, $10,000 product returns, and $60,000 costs of goods sold. Its actual amounts were $100,000 gross sales, $2,000 returns, and $40,000 cost of goods sold. Does the IRS have the right to audit this return from five years ago?
G-5Paul and Patty Nelson own a home in Nelsonville, Ohio, and maintain apartments in Lexington, Kentucky, New York City (part year), and Philadelphia (part year). Their cars are registered in Kentucky, and they have driver’s licenses from Kentucky. However, the Nelsons consider Nelsonville their “home” because their house was inherited from Paul’s parents and has been in the family for more than 150 years. During the year, Paul traveled between Kentucky and Nelsonville numerous times. Patty did not usually accompany Paul, as she works for a consulting firm on engagements in New York City and Philadelphia. The home office of her employer is in Chicago, but she never works in Illinois. Paul’s sales region for his job is Kentucky and Indiana. For purposes of taking expenses while away from home, Paul and Patty use their Nelsonville home. Is this correct? Where is the Nelsons’ tax home?
