Assignment 2: Constructive Dividends, Redemptions, and Related Party Losses
Due Week 4 and worth 200 points
Suppose you are a CPA hired to represent a client that is currently under examination by the IRS. The client is the president and 95% shareholder of a building supply sales and warehousing business. He also owns 50% of the stock of a construction company. The remaining 50% of the stock of the construction company is owned by the client’s son. The client has received a Notice of Proposed Adjustments (NPA) on three (3) significant issues related to the building supply business for the years under examination. The issues identified in the NPA are unreasonable compensation, stock redemptions, and a rental loss. Additional facts regarding the issues are reflected below:
Use the Internet and Strayer databases to research the rules and income tax laws regarding unreasonable compensation, stock redemptions treated as dividends and related party losses. Be sure to use the six (6) step tax research process in Chapter 1 and demonstrated in Appendix A of your textbook as a guide for your written response.
Write a three to four (3-4) page paper in which you:
Your assignment must follow these formatting requirements:
The specific course learning outcomes associated with this assignment are:
Grading for this assignment will be based on answer quality, logic / organization of the paper, and language and writing skills, using the following rubric found here.
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