Question

Choose one of the following independent situations and indicate whether the item is generally a tax or a nontax consideration in solving a tax research or tax planning problem. Please include a full explanation as to why you have chosen the way you did

a. The taxpayer hates to pay Federal taxes. He will take any legal action to avoid paying any Federal income, estate, or gift taxes.

b. The taxpayer does not trust the United States banking system and moves all her money to a bank in Switzerland.
c. The taxpayer is married and his spouse is financially naïve. Since he is in bad health, the taxpayer wants to make sure his wife will be taken care of financially if he were to suddenly die.
d. The taxpayer wants to purchase rental real estate. He wants to make sure that he will not be subject to a high state tax where he buys.
e. The taxpayer owns city of San Diego bonds instead of putting his money in a commercial bank.

Answer 1

a. Non tax. It is a personal consideration that the taxpayer does not want to pay federal taxes.

b. Non tax. It is also a personal consideration that the taxpayer does not trust the United States banking system.

c. Non tax. It is a Family consideration

d. Tax. It is a tax consideration that the taxpayer wants to have lower tax liability and he wants to invest in the real estate in the state which have lower state tax rates.

e. Tax. It is also a tax consideration. The tax wants to have lower tax liability so he invested in city of San Diego bonds, which is tax exempted instead of putting his money in a commercial bank where he has to pay tax on interest income.