Writing Homework Help

Here’s ACCT 560

CHOOSE 1: or your initial posting to this week’s discussion, choose only one of the following cases and discuss whether the circumstances or statements are true or false, and explain your reasoning. Be sure to clearly identify in your posting which one of the cases you selected, and do your best to choose a case that hasn’t been already been covered, at least until all have finally been addressed with at least one comment. You may then post a follow-up comment on the reasoning of your fellow classmates.

• In the current taxable year, married couple H and W gives a completed gift of a $20,000 certificate of deposit bearing simple interest to their 15-year-old child, C. The interest on the certificate paid to C during the current year totals $1,600. Under the assignment of income doctrine, the $1,600 must be included in the gross income of H and W.
• Individual S is the sole shareholder of Corporation Y. The corporation employs S’s college-aged granddaughter as secretary treasurer for the summer, paying her $25,000 for 3 months of work. If the Internal Revenue Service determines that the granddaughter is not a bona fide corporate employee and disallows the entire $25,000 salary deduction, the $25,000 payment could be reclassified as a dividend to the granddaughter.
• The payment of dividends by a regular family corporation to shareholders who are low tax bracket family members is an economical and effective method for family income shifting.
• On the whole, a regular corporation provides more intra-family income shifting advantages than an S corporation provides.
• Mr. and Mrs. B are equal shareholders in Beta Corporation, which is an S corporation. In order to shift corporate income to their children and still retain total control of the corporation, Mr. and Mrs. B may have Beta issue common, nonvoting stock to their children without terminating Beta’s subchapter S election.
• The purpose of a Crummey power in a trust is to prevent a beneficiary from gaining access to current additions to the trust.
• Taxpayer T would like to shift some of his current year taxable income to an elderly aunt. T can accomplish this objective through the use of a $150,000 interest-free demand loan to his aunt.
• Taxpayer T transfers $1 million in assets to a revocable trust. Under the terms of the trust instrument, daughter D will be paid the income generated by the trust assets for her life, and charity C will receive the remainder interest upon D’s death. The income of this trust will be taxed to T.
• An excellent source of funds with which to pay a sizable federal estate tax is insurance on the life of the potential decedent, with the decedent’s estate named as a beneficiary.

2. Thanks for starting us off here and talking about this specific scenario. Do you think a lot of income shifting happens between parents and children? Class?

ELABORATE ON THIS STUDENTS POST

3. Keshawn Idris

Just elabarote on Keshawn’s post he chose #6

Sep 29 at 7:55pm

Manage Discussion Entry

Hello Professor and Class,

I researched case #6 The purpose of a Crummey power in a trust is to prevent a beneficiary from gaining access to current additions to the trust. This statement is false Crummey power in a trust actually allows the beneficiary to make withdraws from the trust within a set span of time. The Tax Adviser breaks down the Crummey Power best stating, ” In the typical Crummey trust, a periodic contribution of assets to the trust is accompanied by an immediate withdrawal power that gives the beneficiary the right to withdraw the contribution for a limited time. However, the expectation of the donor is that the power to withdraw will not be exercised (although there should be no express agreement to this effect). The beneficiary’s limited withdrawal right (a Crummey power) causes the gift to the trust to be a gift of a present interest that can be sheltered by the annual gift tax exclusion” (Ellentuck, 2014).

Reference:

Ellentuck, A. B. (2014, November 1). Using a crummey trust to preserve gift tax exclusion. The Tax Adviser. Retrieved September 30, 2021, from https://www.thetaxadviser.com/issues/2014/nov/case-study-nov2014.html (Links to an external site.).