Prompt You are a tax advisor and your client, Nora, owns and operates C-C Bakery. She encounters three different tax scenarios on which she requests your advice. You are to research the relevant tax c

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Prompt

You are a tax advisor and your client, Nora, owns and operates C-C Bakery. She encounters three different tax scenarios on which she requests your advice. You are to research the relevant tax code and make recommendations to her in the form of a memorandum for each situation. The IRS questions some of the deductions she has taken based on your advice. You must review the Final Project IRS Notice document and respond appropriately to the IRS, citing guidance that you have researched when giving this advice.

  1. Bonus Depreciation and Extra Deduction
    1. Identify sources for evaluating the appropriate tax situation.
    2. Document research performed to determine if bonus depreciation applies to tax year and specific assets. Describe your results.
    3. Apply research to specific assets and determine amount of deduction.
    4. Document findings and advice in a memorandum to the client. Include supporting details.
  2. Charitable Giving
    1. Identify sources for evaluating the appropriate tax situation.
    2. Document research performed to determine if charitable giving applies to tax year and specific limitations. Describe your results.
    3. Apply research to individual or business tax years and determine amount of deduction.
    4. Document findings and advice in a memorandum to the client. Include supporting details.
  3. Home Office Deduction
    1. Identify sources for evaluating the appropriate tax situation.
    2. Document research performed to determine if home office deduction applies to tax year. Describe your results.
    3. Apply research to specific fact patterns and determine amount of deduction.
    4. Document findings and advice in a memorandum to the client. Include supporting details.
  4. Responding to an IRS Notice
    1. Review the notice to see which tax issues were adjusted. Summarize your review.
    2. Document research performed to determine the laws that were referenced pertaining to these sets of facts. Describe your results.
    3. Determine the outcome and report your advice to the client.
    4. Formulate a response letter to the IRS.

Letter received from IRS:

C-C Bakery 

1234 Bakery Road 

Jacksonville, Florida 32256 

We Have Questions About Your Filed Return As a result of your recent filing, we have questions regarding your filed corporate and individual return. Please review the following and respond accordingly. 

Bonus Depreciation 

Upon reviewing the Form 4562 detail, we noticed that you purchased and depreciated an oven, bakery display, connected refrigerator and freezer, commercial mixer, and improvements to the air conditioner and roofing. Please explain why bonus depreciation was taken on some of these assets and why you believe they qualify for an additional deduction? Please explain the classification of each asset, why each asset was classified the way it was, and provide any additional information to support the depreciation expense as a whole. 

Charitable Deductions 

Upon reviewing your Individual Form 1040 and Corporate Form 1120, we see that some charitable donations were taken. How did you or your tax advisor verify that the Boys and Girls Club qualified as a 501(c)3? In our recent conversation, we understood that tax advice was given regarding deducting this on a corporate return or individual return. Please explain what tax advice was given to you. 

Home Office Deduction 

We see that you have taken a home office deduction on your individual return. Please provide evidence and support that qualifies you to take deductions regarding your prorated expenses associated with the square footage of your home. Please list out details regarding the specific deductions taken, why they were taken, and under what code section. Do you have an office at your bakery? Do you meet clients at your office? Did you verify any of these questions when claiming the deduction? Please list any further information gathered that supports this deduction. 

We have asked you to provide further support on the previous matters. Please respond within 30 days, so that we can further review the information and make any adjustments, if needed. If you believe we need further information to understand the deductions, please provide. If you would like your tax adviser(s) to represent you, please also provide a signed power of attorney (Form 2848) with this response. __________________________________________________________________________________________________ 

IRS Agent Assigned – Celine Mila 

IRS Agent ID – 7749403809 

Contact Number 904-555-7564

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