INDIVIDUAL INCOME TAX (CLIENT MEMO) 4
TO: Client Name
FROM: XYZ Tax Consultants
SUBJECT: Tax Returns
Taxableincome is the amount of proceeds used to calculate an individual`s ora company`s earnings tax due. The amount to be taxed is derived bysubtracting any deductions or exemptions allowed by U.S code chapter26 from the gross income. An individual should report any income thatwas earned during the period at hand as taxable proceeds to avoidbeing penalized. False imprisonment amount received is not amongreturns that are not taxable thus, you were supposed to report it astaxable income for the period. You should note that compensations forphysical injuries or sickness are the only amounts allowableunder IRCSec(s). 104(a)(2).This reparation applies where conditions, for example, considerablepassage of time since the assumed wrongful conduct and verity that aperson was minor at the moment, render it rational for IRS to deducethat such reimbursement was for an individual`s special injuries, aswell as emotional anguish attributable to such damages(CCA200809001 — Code Sec(s)).
The Internal Revenue Codegoverns the laws that relate to tax issues and is enforced byInternal Revenue Service. The code covers rules about income, gift,estate, sales, and excise taxes. In ensuring compliance with thecode, you should follow all guidelines laid out in publications, butone can consult the tax code directly in complex situations forinterpretation.
Tax returns are an essential partof an individual to ensure compliance with the tax laws of the land.While filling returns, one should disclose all the requiredinformation to ensure they are not liable for penalties for actionsthat may be deemed as dishonest (§104 Compensation for injuries or sickness).The amounts included in the Internal Revenue Code as nottaxable does not include false imprisonment. Ideally, if exclusionwas to be made, physical injury should have been evident, and thiswas not the case as you only suffered emotional harm. In the case ofDaniel J. Stadnyk, et ux.v. Commissioner, theIRS declared that nine previous verdicts have been proclaimedoutdated, in full or partially, and that two printed acquiescences toBTA resolutions have been extracted(Daniel J. Stadnyk, et ux. v. Commissioner).The same applies to declarations bythe Revenue Rulings in similar suits (Rev. Rul. 2007-14,2007-1 CB 747 — IRC Sec(s). 162 7805, 02/16/2007) Therefore, it isadvisable that you re-file the tax returns and include $96,000 due tofalse imprisonment as income. I will be glad to discuss the aboverecommendation with you later on and follow through on any decisionsyou make.
§ 104 Compensation forinjuries or sickness.Checkpoint.riag.com.Retrieved 17 October 2016, fromhttps://checkpoint.riag.com/app/main/doc?usid=416d90n166075&DocID=i82bffdf019d711dcb1a9c7f8ee2eaa77&collId=T0toc080&docTid=T0TCODE%3A3303.1-1&feature=tcheckpoint&lastCpReqId=658587&searchHandle=i0ad69f8e00000157d102c2361a454fe0
CCA 200809001 — Code Sec(s). 104 6041, 02/29/2008 Chief CounselAdvice (RIA). (2008). Checkpoint.riag.com. Retrieved 17 October2016, fromhttps://checkpoint.riag.com/app/main/doc?usid=416d90n166075&DocID=ifa9d416a344e11dd8d85c7f8ee2eaa77&collId=T0toc096c&docTid=T0IRSDOCS%3A54731.1-1&feature=tcheckpoint&lastCpReqId=658371&searchHandle=i0ad6ada600000157d0e683d8b0a31081.
Daniel J. Stadnyk, et ux.v. Commissioner, TC Memo2008-289, Code Sec(s) 10461.
Rev. Rul. 2007-14, 2007-1 CB 747 — IRC Sec(s). 162 7805,02/16/2007. Revenue Rulings (1954 – Present) (RIA)