Chapter 1, Problem 50DQ

Craig commits fraud on his tax return. It is found that he was $40,000 deficient in his tax because of the fraud. What would his penalty be? Please show all calculations to demonstrate how you arrived at your answer.   In your response, please make sure to take all of the facts above into consideration. You can refer back to the text, lecture videos, and the IRS website.

During 2020, Jackie sent her brother Junnie $2,500 via a telegraphic transfer through El Banco Prieto. The bank’s remittance clerk made a mistake and credited Junnie with $250,000 which he promptly withdrew. The bank demanded the return of the mistakenly credited excess, but Junnie refused to do so. The BIR entered the picture and investigated Junnie. Would the BIR be correct if it determines that he earned a taxable income under the facts? No, it was not her fault that the funds in excess of $2,500 were credited to him. Yes, income is a taxable income regardless of the source No, he had no income because he had no right to the mistakenly credited funds. No, the funds in excess of $2,500 were in effect donated to her.

Tim receives a $25,000 gift from his parents for a down payment on a house. They know he cannot buy a house without their help. They write “gift” in the memo line of the check. How much of the gift is taxable to Tim?   In your response, please make sure to take all of the facts above into consideration. You can refer back to the text, lecture videos, and the IRS website. Please make sure to support whatever conclusion you decide to present.