Essay Tax Memo

Submitted By etsy0714
Words: 609
Pages: 3
Open Document
Memorandum
To: Professor
From: Sarah Smith
Date: July 13, 2014
Re: Depreciation on Rental Equipment ________________________________________________________________________Harry Pickart rents aircraft parts to be used in film production. He purchased the majority of the parts through auctions. The aircraft parts are returned to Harry after the rental period is up. Harry tries to fix the pieces after they are returned since most of them are damaged when they are returned. These repairs are adding to the useful life and allowing them to be rented out again. Harry believes the pieces have a useful life of less than four years and should be classified as three-year property. Questions Presented: Can the aircraft parts that Harry rents out be depreciated over three years and be considered as a three-year property? I would not advise that Harry tries to classify these parts as a three-year property. The actual expected life is not accounted for, but instead this type of equipment is classified already by using the expected life. This equipment falls under the category of a five-year property.
The aircraft parts are considered to be a capital asset and the owner can depreciate this equipment that is being leased or rented out to the customers. In order for the aircraft parts to be considered a capital asset, they must be useful to the business for more than one year, which is this case they are. According to the report, "Report to The Congress on Depreciation Recovery Periods and Methods," which was written by the IRS, anything with less than a four year useful life is considered three-year property. Someone cannot just determine this. There are separate classes for each type of property that must be used. In this case they range from three years to twenty years. Most equipment is categorized as having a useful life of five years. Harry makes repairs on this equipment to try to add to the useful life, but the class stating that falls in the five-year category will not change. The actual useful life does not matter. According to the IRS publication, 946, a three-year property may be a tractor unit for road use, a race horse with stipulations, or a qualified rent-to-own property. The aircraft parts do not fall under any of those categories, so Mr. Pickart would be incorrect in making the decision to do it anyway. In conclusion, Mr. Pickart should definitely follow the classifications set by the IRS. It pays to do things the right way the first time. The MACRS table should help him to understand what type of property is
Show More

Related Documents: Essay Tax Memo

Richard A. Polacsek: The Tax Memo 1981-569

The tax memorandum, Richard A. Polacsek, TC Memo 1981-569, presents a case that is similar to Brad’s. In order for Richard A. Polacsek to strengthen his breathing techniques, it was necessary for him to install a pool in his backyard (in order to take part in daily swims). Henceforth, in 1975, Polacsek installed a pool that was 4 feet deep, 14 feet wide, and 28 feet long with no visible copings or diving boards in its proximity. The final cost of the pool totalled up to $10,516.26, which was $9…

Words 181 - Pages 1

Essay on Gambling and American Opportunity Tax

In Tschetschot v. Commissioner, T.C. Memo. 2007-38, the taxpayer won more than $11,000 in nine "tournament poker" games. Because of expenses, however, she claimed a net loss of nearly $30,000 on her Schedule C. The government contended that the taxpayer's deductions were limited to her $11,000 of winnings under § 165(d). (The government conceded that the taxpayer was a "professional gambler" and thus could deduct her expenses, as limited by § 165(d), on her Schedule C. Non-professional gamblers can…

Words 620 - Pages 3

Essay about Business Law Final Exam. Kellogg Business School

Question Four 1. The memo is legal according the local law. Nonetheless, a legal action may be unethical. The question is what is ethical, and if publishing the memo is an ethical action. In order to value the ethical aspect of the action we have to answer the following questions: 2.1. Is it legal? Yes, under the Singapore law, members of investment banking firm are allowed to subscribe to shares in an IPO. The worldwide policy of the firm doesn’t make the memo illegal, rather than a…

Words 1928 - Pages 8

An Analysis Of Jim's Corporate Tax And Corporate Finance

LeeAnn Ryan ACCT618-01 April 9, 2014 Give an overview of what is going to be discussed in the memo As JIM’s corporate tax and financial analyst, it is part of my job to be familiar with all of the laws, rules and regulations that go along with working for a C Corporation. This includes the ins and outs of what is expected as well as any and all advantages and disadvantages of this process. In this memo I will explain all of this as well as the exchange currency risks of a multinational corporation…

Words 769 - Pages 4

Advanced Income Tax Essay

William H. Bigsby Jr. Income Tax 26 September 2013 Prof. Powell Research Problem Chapter 5-2 I. Facts about my client: Client was diagnosed with multiple sclerosis when she was 27 years old. Client was employed full-time. Client remained full-time after her condition was discovered. Her employer placed extreme pressure on her. Employer’s pressure caused symptoms of multiple sclerosis to accelerate. Client was then fired by employer. Client sued the employer and collected damages caused by the employers’…

Words 589 - Pages 3

Smith Co.: Weighted Average Cost Of Capital

is the specific proportionate weight of debt and equity that will make Smith Co.’s WACC the lowest percentage possible. Effect on WACC when Adding Debt or Equity The cost of equity is typically greater than the cost of debt due to the increase in tax savings; therefore, when you add debt the WACC tends to decrease. However, a company’s risk tends to increase with added debt. If interest rates rise the cost of debt and overall cost of capital will increase. The more debt added, the more difficult…

Words 1011 - Pages 5

Corporate Tax Case Study Essay

meeting because she has some additional tax planning advice to ask of you. ROLE: After reviewing John and Jane Smith's points of view, it will be your turn as a tax professional to decide on the best course of action from a tax perspective on their issues. Prepare a three page memo (at least…

Words 1182 - Pages 5

How Is The $ 25, 000 Treated For Purposes Of Federal Tax Income?

Memo To: John and Jane Smith From: Jaleesa Branch Date: 10/6/14 Re: Memo summarizing various tax issues 1. John Smith's Tax Issues Issue (a): How is the $300,000 treated for purposes of federal tax income? The $300,000 is treated as business income. After deducting all of the business expenses, the remaining amount will be the taxable income. Lawyers either work on a salary in a big law firm, or work directly with clients and collect the fees from these clients. If it…

Words 1424 - Pages 6

Purchase Order and Item Essay

Assignment # 1 Request For Proposals January 29th 2012 Executive Summary This report is about the creation and format of RFP's. It includes an analysis done by myself on three separate documents which discuss this topic. Through my research I selected three templates which could potentially be used for our project. All three of them are discussed and one is selected as the template which should be used for our supply chain management request for proposal.…

Words 7233 - Pages 29

Taxation in the United States and Gross Income Essay

How to write a memo Use the IRAC method-Determine the facts then: I-Issue (Question) R-Rule (which rules apply) A-Analysis C-Conclusion After the first draft, look back at the facts. Are more needed or is more research needed. Code and regulations Internal revenue code is a law enacted by congress-currently Internal revenue Code of 1986, as amended (“IRC”) Regulations are issued by the treasury-the IRS (Permanent, temporary and proposed) Legislative or interpretive-but both are so well…

Words 469 - Pages 2