ACC530-BE Tax Research Memo #4 PDF

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Final tax memo critical assignment....

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Tax Research Memorandum #4

Ebony Chew ACC 530-BE Taxation for Business Entities Professor Gary Conlay June 15, 2021

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Cal Baptist CPA Firm, LLP Sonny Day, CPA 123 Main St. Los Angeles, CA 90046

Internal Revenue Service ATTN: Agent McGrue 123 Money Lane Los Angeles, CA 90045

June 15, 2021

RE: Formal Protest

Tax Payer Information: New Media WebSolutions, LLC (A California Limited Liability Company) 8200 Wilshire Blvd. Suite 200 Beverly Hills, CA 90211

Tax ID Number: 12-3456789 Taxable Year Ends: November 30 Tax Year in Dispute: 2012

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Dear Agent McGrue: I am writing to you regarding my client New Media Web Solutions Limited Liability Corporation. The company is a full-service software development company that completes projects ranging from basic website creation to large databases along with computer programming or mobile application development. As their projects have become well-known, they have been able to bring more clients as well as have many sales consultants to continue the growth of the limited liability corporation in the market. The staff has been successful in bringing new business in both the United States and London as traveling and entertainment were expenses on the company.

Important Facts My client received a notification from your office, and it seems to be two issues needed to be addressed. New Media Web Solutions, LLC is required to pay taxes on the expenses of $50,000 that at the time were disallowed meaning the expenses of the money were expenses towards meals and traveling. Considering the nature of the expenses they did not appear to be excessive expenses. We have taken note that New Media Web Solutions, LLC does not have any receipts of the $50,000 being incurred. The issue will be sorted out with my client as our firm took note the receipts must be present to show that the company expensed the year for income purposes to its employees. The company is required to pay taxes on the $100,000 that they claimed as a deduction on the promissory note received from Big Time Tech in the amount of $200,000. Because of bankruptcy the $100,000 is insufficient ad the deduction was disallowed as well.

ISSUE 1: Agreement between New Media and Big Time Tech $50,000 payment.

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ISSUE 2: New Media Web Solutions $100,000 debt of the promissory note due to bankruptcy.

ISSUE 1 Any expenses incurred in relation to the business are allowed as a deduction stated in 26 U.S. Code § 162 - Trade or business expenses which results in the $50,000 expense incurred on behalf of the sale consultants in New Media Web Solutions, LLC on meal and travel sections are allowed to be treated as a deduction including no additional tax on the amount of money. Because the expenses are through the year including the hiring of sale consultants, are known as employees to my client and are not thought of as an expense to the company considering the state of the expenses incurred while acquiring the new business for the corporation.

ISSUE 2 The $100,000 is not required any additional taxes and my client is not required to pay due to the bad debt. Section 26 U.S. Code § 166 - Bad debts states it is allowed as a deduction of any debt which becomes worthless within the taxable year and when partially debts are satisfied that a debt is recoverable the secretary may allow such the part of the debt charged off within the taxable year as a deduction (Cornell Law School, n.d., p. 1). Because of the bankruptcy, the $100,000 cannot be recovered from my client’s customer. The bad debt of the amount is allowed to be deducted with no additional tax required to pay by the corporation.

After reviewing the case we have concluded that New Media Web Solutions, LLC is not required to pay the expenses and bad debt deductions stated in the Internal Revenue Code. It is with the

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hope that we can come to an agreement with your office based on the facts presented and look forward to hearing your response as soon as possible.

Sincerely,

Ebony Chew

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Chew References Page

26 U.S. Code § 166 - Bad debts. (n.d.). Retrieved June 15, 2021, from https://www.law.cornell.edu/uscode/text/26/166 26 U.S. Code § 162 - Trade or business expenses. (n.d.). Retrieved June 15, 2021, from https://www.law.cornell.edu/uscode/text/26/162...