StudentShare solutions
Triangle menu

Tax case meno - Research Paper Example

Not dowloaded yet

Extract of sample
Tax case meno

Normally, the cost of tools forms part of capital goods that the company requires to run its operation. Under the IRC section 263A, the uniform capitalization rule dictates that the taxpayer should produce information for all direct costs and certain in direct cost concerning tangible and real property. The law defines tangible and real property as those that lead to production such as to construct, build, install, manufacture, develop, improve, create, raise or grow (DiNardo, Baldwin and Harris 106). From this provision of the law, it is evident that the allowances that the company pays to cater for the cost of various tools of trade fall under capital goods and that they are tangible in nature. If this were the case, the provision of IRC section 263A, states that the taxpayer should treat such information as direct because they affect the cost of capital. It follows therefore, that Cambro Construction Company should treat the allowances it reimburses as cost for capital goods. Combro Company should treat this case as cost associated with tangible assets, which it uses to aid production. Therefore, the tax treatment for this case should be ordinary. Under this category, the taxpayer should accumulate all the information concerning this cost and treat them a cost of assets used in production. Thus, Cambro Construction Company should prepare tax report concerning the accumulated cost it incurred to reimburse cost for the capital goods. For a cost to qualify as capitalization cost under IRC section 263A, it must fall into the capital accounts as defined by section 1.446-1(c) (1) (ii). This provision tends to define the treatment of cost incurred by a company to buy assets or other related costs. The section 263A states that: Except as otherwise provided, direct and indirect costs that directly benefit or are incurred by reason of the performance of production or resale activities must be capitalized to the property produced or acquired for resale (DiNardo, Baldwin and Harris 106). The provision of section 1.263A-1(e) (3) (iii) gives examples of indirect costs which the taxpayers should capitalize are tools and equipment. Further, this provision indicates that the producers must capitalize costs other interest whether incurred before, during, and after production period of property. Arguing from this provision, the cost incurred by Cambro Construction Company to reimburse the capital cost of its carpenters fall under the indirect costs. Thus, Cambro Construction Company should treat such indirect cost as provided for in the section 263A of the IRC. The must record this information whether it incurred it before, during, or after the production period. This implies that the law does not exempt the company from compiling tax information concerning the property that it acquired during its construction period. Largely, the fact that Cambro Construction Company does its activities with an aim of reselling them further makes it necessary for it to capitalize this cost. Cases bordering incidental repair of property seems to be closer to the above facts but not exact. In incidental repair, the taxpayer deducts a given cost to repair of the property with a view of prolonging the use of that property. Section 167 provides the treatment of such repairs. When a taxpayer makes full replacement for the property, the treatment that follows should be capitalization or depreciation as ...Show more

Summary

Tax Case Memorandum To: From: Date: Facts Cambro Construction Company hires union carpenters for home building. Cambro requires, as a condition of employment, that the carpenters provide and maintain various tools of their trade. Cambro pays each carpenter a set amount per hour as a “tool allowance” to cover the costs of the tools…
Author : princessmills
Tax case meno essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the research paper on your topic
"Tax case meno"
with a personal 20% discount.
Grab the best paper

Related Essays

Tax Law & Accounting
Tax law and accounting under GAAP are facing wide controversy as to their functions to the society nowadays. The ratifications of earlier tax laws have created the modern tax statutes with additional objectives.
4 pages (1000 words) Research Paper
Plato's Meno Research Paper
One of the ideas presented in the Meno is the Theory of Recollection, which Socrates demonstrates to Meno by getting a slave boy to solve a basic geometry problem. Despite the criticisms of the validity of the Theory of Recollection and Socrates’ method of elenchus, the theory remains valid.
6 pages (1500 words) Research Paper
Assignment 3: Tax Credits
23). Since 1940s, the U.S tax code has undergone many modifications to ensure justice to taxpayers as well as to generate revenue for the federal government. Tax credits, along with other instruments such as tax deductions and tax exemptions, was used to protecting various income groups and business enterprises during economic downturn (economic instability).
8 pages (2000 words) Research Paper
Federal Tax Case
In this case, both the United States Tax Court and the Fourth Circuit Court of Appeals determined that you could not exclude from income an early separation payment you received from the United States Navy. You had excluded the payment under section 112 of the IRS as compensation while on active duty in combat zone.
3 pages (750 words) Research Paper
Federal Tax Case
From this paper, it is clear that the exclusion separation payment from gross income applies to compensation received for active service for any month during any part of which the member served in a combat zone. Payments under the United States Navy are described in the establishing legislation as a severance pay intended to replace Navy’s pension.
4 pages (1000 words) Research Paper
Organizational Tax Research and Planning - Estate Tax
The Internal Revenue Service (IRS) is the body charged with the administration of estate tax. In the present provisions of IRS, estate tax is taxable at a maximum rate of 35 percent and exempted up to $5,120,000.
10 pages (2500 words) Research Paper
Tax Research
three issues: first, the house was destroyed in taxable year 2009; second, the house was destroyed by a natural disaster: third, the insurance company doe not cover for damages or destruction caused by natural disaster. Section 165(a) provides that, in computing taxable income
2 pages (500 words) Research Paper
Tax Research
rease of taxes on the wealthiest, through raising the rates on the capital gains together with dividends for rich, Romney plans to decrease all tax rates. Moreover, Obama seeks to reform the corporate tax code, but on the other hand Romney claims that he will slash the corporate
2 pages (500 words) Research Paper
Assignment 3: Tax Credits
Tax credits, along with other instruments such as tax deductions and tax exemptions, was used to protecting various income groups and business enterprises during economic downturn (economic instability). Tax credits are neutral and enable the Congress in making certain that
8 pages (2000 words) Research Paper
Carbon Tax

According to the author, the levying of carbon tax is considered to be necessary, because it would help to price the fuels equitably and would solve the problem of the excessive combustion of fuels that produce carbon emissions. The imposition of carbon tax is expected to solve the problems related to the use of energy resources.

8 pages (2000 words) Research Paper
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation