Chapter 1, Problem 1DQ

a.

To determine

Determine if the tax position of the taxpayer change in the given situation or not.

Explanation of Solution

What is Tax: A tax is a payment levied by the order of Federal, state or local government agencies and collected from the general public to fund the developmental work of the government and not directly linked to the benefits received by the public. A tax must have following characteristics;

1. 1. Tax is mandatory payment from the eligible public/enterprise
2. 2. Tax is levied by the Government agencies
3. 3. Tax has no direct relationship with the benefit received by the taxpayer

Yes, the tax positon for J would change in this situation. J must recognize the rental income and segregate the expenses for personal use and rental use, since J may have to pay transient occupancy tax.

b.

To determine

Determine if the tax position of the taxpayer change in the given situation or not.

Explanation of Solution

Yes, the tax position of T would change. T become a self-employed and may have to pay quarterly tax on estimated income and self-employment tax. If she employs any staff members, she may have to withhold payroll tax from her employees and deposit it with the government.

c.

To determine

Determine if the tax position of the taxpayer change in the given situation or not.

Explanation of Solution

Yes, the tax position of P would change. The employer of P is entitled deductions for the moving expenses incurred by P but P cannot claim that deduction. P may not be subject to personal income tax in F that was taxable in C.