IRS Ethical Issues Paper

Now the following information is well documented and is presented for your review and edification. Do not try to fight the IRS in federal court, you will not win. The deception runs rampant throughout the executive, legislative and judicial branches.

Parent Corporation owns 85% of the common stock and 100% of the preferred stock of Subsidiary Corporation. The common stock and preferred stock have adjusted bases of $500,000 and $200,000, respectively, to Parent. Subsidiary adopts a plan of liquidation on July 3 of the current year, when its assets have a $1 million FMV. Liabilities on that date amount to $850,000. On November 9, Subsidiary pays off its creditors and distributes $150,000 to Parent with respect to its preferred stock. No cash remain to be aid to Parent with respect to the remaining $50,000 of its liquidation preference for the preferred stock, or with respect to any common stock. In each of Subsidiary’s tax years, less than %10 of its gross

This post will discuss two ethical accounting dilemmas that could occur in the CPA profession. For each dilemma, it will explain how the dilemma could be resolved based on logic and reason. It will then support that proposed resolution through support from the American Institute of Certified Professional Accountants (AICPA) Code of Professional Conduct.

AmeriSouth argued that cost-segregation study allocates $65,381 of Garden House's depreciable basis to “site preparation and earthwork,” depreciable over 15 years as a land improvement is allowable because it is a “site development,” but nowhere does it describe what work is included in this category. On the other hand, the Commissioner's expert claims that work papers show the expenses relate to the initial clearing and grubbing (i.e., tree removal) of the land which occurred before the apartments' construction in 1970.

As for the issue of whether or not you should take out another mortgage in order to supplement the conversion of Certificate of Deposits into Municipal Bonds, again, I.R.C. §265(a)(2) comes into effect and disallows any interest deductions sought, thus, removing the profitable advantage offered though the interest rates. In similar situations, such as Wisconsin Cheeseman, Inc. v. United States, 388 F. 2d 420 (1968), the Court ruled against the taxpayer on the claim that the taxpayer was only allowed deductions on the interest of the indebtedness incurred prior to the purchase of the tax exempt investments, meaning that only the interest deductions on the new debt incurred was disallowed. In Wynn v. United States, 411 F. 2d 614 (1969), the taxpayer was also disallowed to claim any deduction for the interest payments on the loans he incurred from the bank, the purpose of which was to expand the amount of tax-exempt securities the taxpayer currently possessed. In Drybrough v. Commissioner, 376 F. 2d 350 (1967), that taxpayer also tries to deduct the interest payments on his leveraged mortgages in order to expand their tax-exempt investment fund, and again, the Court referred to I.R.C. §265(a)(2), which forbids such deductions on the basis that the sum of the interest paid was used to purchase tax exempt securities, thus ruling against the taxpayer. Although the Court’s ruled

However, the companies only have to pay the U.S. tax for foreign revenues once they bring the profits back to the United States. As a result of these current tax laws, U.S. companies that seek to avoid high corporate tax rates hold their foreign earned profits overseas. “It just makes no sense to pay a substantial tax on it,” said Joseph Kennedy, a senior fellow at the Information Technology and Innovation Foundation (Rubin, R.). It is far too easy for an IT corporation to create a patent in a foreign country and direct revenue to a corporation within that country, thus avoiding the much higher U.S. tax rates. According to Joint Committee on Taxation estimates, the lost revenue is increasing over time as corporations find even more creative ways to make their U.S. profits look like offshore income (Richards, K., & Craig, J.). As result, multinational American corporations have as much as $2 trillion held in overseas subsidiaries and if brought into the United States with the current tax laws, the federal government could benefit by nearly $50 billion per year.

The main objective of many companies is to minimize their tax obligations. Jeffers (2014) discussed the reason of why companies adopt tax inversion strategies. The researcher indicated that the income maximization is a major reason of companies attempting to reduce their tax liability (pp. 100-101). Tax inversion strategies provide companies an advantage to lower income tax rate. Today, U.S. corporations renounce its U.S. citizenship and move to low-tax countries. Companies that reincorporate oversees are not obligated to pay U.S. taxes on earning income (p. 99). Many countries implement tax competition strategies to attract and retain businesses. Well-known companies, such as Exxon Mobil, Hewlett Packard, Tyco, General Electric, PepsiCo, etc. take benefits of tax shelter opportunities overseas (p. 102). Other benefits of the jurisdiction abroad are flexible banking laws and simplified litigation processes.

Ethical issues and how to comply ethical standards are always concerned of all tax practitioners when conduct tax practice. They are subject to IRS Circular 230, AICPA’s Statements on Standards for Tax Services and relevant penalty provisions in the Internal Revenue Code.

With the next presidential election just around the bend, there have been many heated policy debates on both sides of the caucuses. One of the more intriguing of these has to be the debate on the structure of the current tax system. Many GOP hopefuls are putting forth plans to impose a Flat Tax System. The scope of this paper is not to analyze, per se, the reasons behind their putting forth such ideas. Instead, this paper will attempt to analyze the ethical considerations and ramifications of a flat tax system as opposed to our current progressive system. In order to accomplish this goal the following study will: present a thorough analysis of the background surrounding this issue; the stakeholders and their involvement in the issue as well as the issues effects on each; two ethical theories and test and how they apply; and finally a Biblical interpretation on the ethical issues that will be brought to light and a suggestion to believers on what side they should take given the analysis presented.

Seidman addresses an IRS summons issued to an accounting firm for documents related to work the firm performed for a corporation under IRS investigation. Among the documents the IRS requested was a log containing the identities of investors in potentially abusive tax shelters. The investors petitioned to intervene and assert that revealing their identities was a violation of the tax advice privilege. The Seventh Circuit affirmed the district court’s denial of the investors’ claim, holding that the investors failed to show that confidential communications would be revealed if their identities were disclosed to the IRS. Because federal regulations require that accounting firms maintain

Conclusion: The IRS action was morally wrong because it diminished trust between the client-accountant relationship and public trust in the accounting profession. Although Checksfield has a moral obligation to report a fraud regarding his client, he turned over the confidential report to the IRS without his client permission, which was against a Missouri law.

In the article “Transformation at the IRS”, authors Amy Edmondson and Frances Frei provide an in-depth analysis of the recent transformation that has taken place within the Internal Revenue Service. Their report consisted of a brief synopsis of the problems that the IRS was facing in the late 1980s and 1990s and the solutions that were adopted during the Clinton administration to solve them. By global comparison, the IRS has been extremely effective at the business of collecting taxes. As reported by our authors, the collection of taxes by means of voluntary compliers was at 85% as compared to a single digit success rates in other countries. Despite this

It is imperative for tax professionals to understand the ethics environment of the practice. This paper is focused on the ethical responsibilities of tax professionals.

Ethical issues have greatly transformed in our lives since the great Enron, Xerox and other huge corporations proposed big profits showing earnings of billions of dollars and yet in reality facing bankruptcy. These corporations faced great trouble with the federals and state for manipulating financial statements. But not only corporations can be blamed on this, accounting firms were involved in this as much as the corporations were. With the business stand point, ethics comprises of principles and standards that guide behavior. Investors, traders, customers, and legal system determine whether a specific action is ethical or unethical. Ethical issue is a vast subject, but we will look at the niche

The actions of multinational corporations (MNCs), which derive from their morally dubious goals, may be completely legitimate within a capitalist society. One of these actions that will be examined in this essay is the use of tax havens, as a way of avoiding higher tax liability. This paper will utilise the case study of Apple’s tax avoidance, in examining the legitimation of a company’s goal of profit maximisation, a goal that is against the moral/social consensus