Please complete Question. Show and label all calculations for partial credit. Th

Question

Please complete Question. Show and label all calculations for partial credit.

Thomas received $30,000 in a legal settlement in 2018. The tax treatment of the item is not certain. Thomas’s research results were ambiguous and he is not sure if the income is taxable. Because some doubt remained and because he did not think he would be audited, Thomas decided the income was not taxable and did not include it on his tax return filed on April 14, 2019. His gross income, excluding the $30,000 in question, was $50,000.

Explanation / Answer

a The statute of limitations expires on April 15,2025 for this return i.e. 6 years from the date of filing of retun as omitted gross income is in excess of 25 percent of the gross income reported (30000/50000 = 60%) b If a person knowingly omits income then it constitutes fraud and if IRS can prove that the person committed fraud, then there is no time limit or no statute of limitations on when it can assess additional taxes, penalties, and interest.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.