22. A. If a taxpayer from New Jersey just won $1000, the first questions that would arise would be if the $1000 is taxable and if it needs to be reported. If this were indeed taxable income, we would need to know the filing status of the taxpayer. If this taxpayer does have to report it, we would also need to know the date that the taxpayer won this $1000. There would be potentially more questions that could arise from this situation, but these are the two that would first need to be answered before digging deeper into the scenario.
B. The first question that arises from a taxpayer paying $5000 to his former wife is how long have they not been together and is this a reoccurring payment. Also, what is this $5000 going towards? Is it…show more content… The last piece of information that would be helpful is whether there were any specific rulings made when the divorce was finalized.
B. A source of information that you might need would be prior year tax returns. This will provide information on Mrs. K’s income and what is/was taxable in current and prior years.
C. The facts that Mr. K is 50, previously divorced his prior wife and that he is a doctor is not relevant. The relevant facts are that he pays Mrs. K $10,000 a month.
D. There is a good chance that there will need to be more questions asked in the future. After gaining all the information that was requested in the questions above could potentially create more questions.
E. The first question that needs to be answered is the obvious one if the $10,000 is taxable income. We will learn more to answering this question when we find out whether it is child support or alimony. It is very easy to get these two confused, which in return could either cost or save Mrs. K $10,000 in taxable income.
F. I believe that Mrs. K desires that the $10,000 is not taxable income. This will save her money on her taxes if this is the case. This is important to be able to understand what your client wants and to try and keep them happy. This also proves that, as a tax advisor, you need to be more careful that Mrs. K does not construe the facts to get her desirable outcome.