Federal Tax Accounting Research Project #4-63

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Tax Research Project #4-63 Facts: • Ann is a graduate economics student at State University. • State University awarded her a $1,000 scholarship. • She works as a half-time teaching assistant in the Economics Dept. at State University and is paid $7,000 per year and her tuition is waived; tuition is $8,000 without waiver. • Her salary is equal to that paid to other part-time instructors. • Ann paid $500 for her books and supplies and she incurred living expenses of $7,400. Issues: How much gross income must Ann report? Reasoning’s and Authorities: According to IRS Code, Sec. 117- “Gross income does not include any amount received as a qualified scholarship by an individual who is a candidate for a degree at an educational …show more content…

Therefore, each partners’ distributive shares of income attributable to the transfer of all substantial rights to the patent would be considered proceeds from the sale or exchange of a capital asset held for more than 1 year. Conclusions: The proceeds collected from the sale of the patent would qualify as LTCG. However, the proceeds are limited as to each partner’s interest in the company. Therefore, Tom would only be able to report his equal distribution as LTCG. Recommendations: It is recommended that Tom determine what his actual interest in the partnership is so that he can accurately determine what amount he will be able to report as LTCG. Tax Research Project #7-68 Facts: • Mr. Smith was involved in an automobile accident last year which caused severe injuries to his leg. • His physician prescribes a daily routine of swimming as part of a long-term rehabilitation process. • There is no readily available public facility nearby; Smith investigates the possibility of either building a pool in his own back yard or purchasing another home with a pool. • In the current year he purchases a new home with a pool for $175,000 and after obtaining some estimates, finds that it would cost approximately $20,000 to replace the pool in the home he has just purchased. • He also obtains real estate appraisals which indicate that the existing pool increases the value of the

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