ITT: Federal Income Tax Forum

[brotherdarkness]

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[hephaestus]

TYIA

So I believe in the case of a taxpayer being allowed to keep any excess the entire amount is not treated as a reimbursement arrangement, but included in AGI.

62(c) Certain arrangements not treated as reimbursement arrangements
For purposes of subsection (a)(2)(A), an arrangement shall in no event be treated as a reimbursement or other expense allowance arrangement if— (1) such arrangement does not require the employee to substantiate the expenses covered by the arrangement to the person providing the reimbursement, or (2) such arrangement provides the employee the right to retain any amount in excess of the substantiated expenses covered under the arrangement.

http://www.law.cornell.edu/uscode/text/26/62

[Jsa725]

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[stillwater]

how the fuck do you take an all essay question tax exam. this is awful.

[brotherdarkness]

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[stillwater]

i legit suck at tax. can't even spot issues. pathetic.

[gregfootball2001]

Taking this next semester - is there a supplement y'all have found helpful?

Good luck!

[brotherdarkness]

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[stillwater]

Taking this next semester - is there a supplement y'all have found helpful?

Good luck!

The E&E is 180.

The Chirelstein has its moments.

This. E&E is 180 180 180 180 180 (even tho ill be 120 on the exam)

[gregfootball2001]

Taking this next semester - is there a supplement y'all have found helpful?

Good luck!

The E&E is 180.

The Chirelstein has its moments.

This. E&E is 180 180 180 180 180 (even tho ill be 120 on the exam)

Awesome. Thanks.

[overkillhsc]

TYIA

So I believe in the case of a taxpayer being allowed to keep any excess the entire amount is not treated as a reimbursement arrangement, but included in AGI.

62(c) Certain arrangements not treated as reimbursement arrangements
For purposes of subsection (a)(2)(A), an arrangement shall in no event be treated as a reimbursement or other expense allowance arrangement if— (1) such arrangement does not require the employee to substantiate the expenses covered by the arrangement to the person providing the reimbursement, or (2) such arrangement provides the employee the right to retain any amount in excess of the substantiated expenses covered under the arrangement.

http://www.law.cornell.edu/uscode/text/26/62

My understanding is not that the employee being re-imbursed in excess of actual costs incurred means the entire re-imbursement is no longer deductible. My class was assigned the following reg in addition to the general code provisions on this topic, which I believe provides that the employee only includes in GI the amount of the excess, rather than the entire re-imbursement.

--LinkRemoved--
(2) Reimbursements in excess of expenses. In case the total of amounts charged directly or indirectly to the employer and received from the employer as advances, reimbursements, or otherwise, exceeds the ordinary and necessary business expenses paid or incurred by the employee and the employee is required to and does account to his employer for such expenses, the taxpayer must include such excess in income and state on his return that he has done so.

However, if you weren't assigned it, you may not need to worry about this.

[brotherdarkness]

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[Tiago Splitter]

Suppose I'm walking around a car dealership and slip/fall on a wet floor. I'm not seriously hurt, but threaten to sue. The car dealership offers to give me 20% of a sweet new ride if I promise not to sue. I take them up on the offer, but tell them to transfer title to my sister. What kind of tax implications would this give rise to?

- I'm not an employee, so there's no qualified employee discount (or any type of fringe benefit, for that matter).
- Normally, if you haggle with a car dealer and get a price lower than sticker, there are no income tax consequences (the dealer's gain in probably reduced and your basis is going to be whatever you pay). Does the fact that I used a threat to sue have any tax implications?
- The transfer to the sister is going to be viewed as a gift, rite? So, I wouldn't get a deduction for the gift and my sister wouldn't have income. My sister would have a basis of $0 and would recognize the unrealized gain when she sells.

Am I on the right track? What other consequences would there be? There were 30 minutes allocated to this hypo and there are no model answers, so I'm guessing I'm missing a lot.

If you pay and then give it to your sister out of disinterested generosity it's a gift. But, her basis is not zero. Look at IRC 1015. If the value goes up, she just uses your basis. If the value goes down, use the FMV at the time of the gift. Here those two are basically the same thing so her basis will be 20k.

I don't see anything wrong with the first part though.

[Jsa725]

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[brotherdarkness]

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[overkillhsc]

^^^ yeah, use 1015 to determine the basis if the sister sells.

ETA: if the sale of 20% off is at a loss… is there a tax implication for the employer? can he deduct under §165(f)/1211

I'm guessing you're looking at the old Berkeley test. The test also provides what the boat dealer paid for the boat. Initially my reaction was that the dealer has a loss to the extent that the price the buyer paid was less than the boat dealer's basis.

Then I ran into the possibility that under the holdings of Philly Park and International Freighting Corp, it is possible that the dealer was compensated for the sale of the boat with more than simply money--that is, by the guy at the dealership not bringing a lawsuit. There is some value in not being sued, although it's hard to guess what FMV is, but since we have an arm's length transaction we should be able to presume that the value of the thing exchanged was equal to the value of what was received (the boat.)

As a result of that idea, I ended up being unsure if this was a loss or not. Any input?

[brotherdarkness]

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[brotherdarkness]

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[stillwater]

I'm pretty sure applying the law isn't important at all.

[brotherdarkness]

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[stillwater]

I'm pretty sure applying the law isn't important at all.

Considering stapling my exam to the cover of my copy of the Code and just turning it in.

brilliant. i would give an H if also accompanied by a note: "plz give to an associate, thx"

[Jsa725]

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[brotherdarkness]

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[captainwasabi09]

Maybe this is sleep deprivation, but although I know how to figure out whether or not to capitalize an expense, I can't think of what capitalizing an expense even means.

[brotherdarkness]

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