Question
1. We learned this semester that not only do we have to determine the amount of income that a taxpayer must recognize for tax purposes, but we also need to determine the type or character of income that is recognized. As we know, this may depend on the type of transaction that generated the income at issue. Explain the general types or categories of income that exist under the Code (e.g., ordinary), and how the amount of each type of income is calculated and taxed under the Code, including what rates may apply.

2. This semester, we learned that Congress designed the Code to include deductions that can be taken for losses that a taxpayer may experience. Two such deductions are (1) the bad debt deduction and (2) the deduction for casualty losses and theft. How does the IRS generally interpret deductions (i.e., broadly or narrowly)? How do we determine whether a taxpayer is entitled to each of these two deductions? What is the purpose of each of these two deductions? Are there any limits on the deduction at issue? Finally, what
generally governs when a taxpayer may take each of these two deductions?

3. As a tax practitioner, you often get people asking questions concerning the tax effect of property transactions. This year is no exception. You’ve had individual clients ask you the following questions:
I. During the course of the year, I swapped some property for what I consider to be similar property. Is this a taxable event? If so, how do I calculate my gain, if any, and my basis in the property that I received?
II. I own part of a C corporation. During the year, the corporation sold me some property at a loss. What are the tax consequences of this transaction to me and the corporation?
Answer each of these questions, explaining the rules that apply to each property transaction and the possible tax consequences of each

4. One of your corporate clients has approached you about whether or not its employees are required to include certain benefits provided by the corporation in their income. In particular, the corporation has inquired whether the following benefits provided by the corporation to employees would be included in an employee’s taxable income:
I. The employer would like to provide employees with valet transportation services to and from work; that is, the employer would like to pick employees up at their homes, transport them to work, and then return them home at the end of the day. In order to operate as cheaply as possible, the company envisions using a number of Toyota Priuses (a relatively small car that holds about four adults, including the driver) to provide the service. These are the same cars that run various errands for the employer during the
day. They estimate that the vehicles will be used about 40% of the time to run various errands, and the remainder of their use will be dedicated to providing the transportation services. The employer anticipates that the monthly value of this benefit would be approximately $300 per month.
II. In order to promote healthier lifestyles and exercise, the employer would like to offer employees the opportunity to use athletic facilities free of charge. They want to extend the benefit to their employees, as well as to the employees’ spouses, dependent children, and parents/grandparents (if applicable). To accomplish this, the employer plans on contracting with a private gymnasium located nearby (e.g., a Gold’s Gym or other gym that sells memberships to the general public). The gymnasium will still maintain its other customers, who it expects will remain the majority of its overall membership. The monthly value of this benefit is estimated to be approximately $200.
Explain to your client the general rules surrounding whether an employee must include benefits provided by the employer in income. Then, for the two proposed benefits mentioned above, explain whether the employee would have to include the amount in income or what provision or exception might apply to make the proposed benefit nontaxable. If the employer would have to make changes to the proposed benefit to
render it nontaxable, explain what changes would have to be made. Finally, explain what the resulting benefit would be to the employee and how much, if any, of the benefit the employee could exclude from income. Make sure to detail any significant exceptions or rules that apply to the benefit exception at issue

5. One of your best individual clients is thinking about starting up a new business, and he is seeking your advice on which business form he should select. In particular, he’s trying to decide whether to operate the business as a sole proprietorship or a C corporation. Explain to him the significant tax and nontax issues that will arise from choosing each of these entities as compared to the other, including how income will be treated by the entity, the overall tax burden, and the effect of distributions of property or earnings from
the entity to your client