RESEARCH PROBLEM #1
Tranquility Funeral Home, Inc., your client, is an accrual basis taxpayer that sells preneed funeral contracts.? Under these contracts, the customer pays in advance for goods and services provided at the contract beneficiary?s death.? These payments are refundable at the contract purchaser?s request, pursuant to state law, anytime until the goods and services are furnished.? Tranquility, consistent with its financial accounting reporting, includes the payments in income for the year the funeral service is provided.? The IRS agent insists that the payments be prepaid income subject to tax in the year of receipt.? Write a letter to Tranquility that contains your advice about how the issue should be resolved.? The client?s address is 400 Rock Street, Memphis, TN 38152.
RESEARCH PROBLEM #2
Esther owns a large home on the East Coast.? Her home is surrounded by large, mature oak trees that significantly increase the value of her home. In August 2014, a hurricane damaged many of the trees surrounding her home.? In September 2014, Esther engaged a local arborist to evaluate and treat the trees, but five of the largest trees were seriously weakened by the storm.? These trees died from disease in 2015.? Esther has ascertained that the amount of the casualty loss from the death of the five trees is $25,000; however, she is uncertain in which year to deduct this loss.? Discuss whether the casualty loss should be deducted in the calculation of Esther?s 2014 or 2015 taxable income.
RESEARCH PROBLEM #3
Aaron, a resident of Minnesota, had been a driver for Green Delivery Service for the past six years.? For this purpose, he leases a truck from Green, and his compensation is based on a percentage of the income resulting from his pickup and delivery services.? Green allows its drivers to choose their 10-hour shifts and does not exercise any control on how these service are carried out (e.g., the route to be taken or the order in which parcels are delivered or picked up).? Under Green?s operating agreement with its drivers, Green can terminate the arrangement after 30 days? notice.? In practice, however, Green allows its truckers to quit immediately without giving advance notice.? The agreement also labels the drivers as independent contractors.? Green maintains no health or retirement plans for its drivers, and each year it reports their income by issuing Forms 1099-MISC (and not forms W-2).? Green requires its drivers to maintain a commercial driver?s license and be in good standing with the state highway law enforcement division.? Is Aaron an independent contractor or an employee?
Running head: ACCOUNTING REPORTING STANDARD
Accounting Reporting Standards
ACCOUNTING REPORTING STANDARDS
400 ROCK STREET,...
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