Solutions to Develop Research Skills Problems for Taxation for Decision Makers by Shirley Dennis-Escoffier, Karen A. Fortin

Solutions to Develop Research Skills Problems for Taxation for Decision Makers by Shirley Dennis-Escoffier, Karen A. Fortin-Note to Instructor: Many of the research problems can be solved using sources that are available on the Internet at no charge. URLs for these free sources are shown in Figure 2.1 of Chapter 2 in the text. The solution for each problem indicates if it can be solved using free Internet sources or if it requires access to Checkpoint® or a similar service. 76. [LO 2.4] Deducting Cosmetic Surgery (can be solved using free Internet sources) Your client, Ms. I.M. Gorgeous, is an aspiring actress. She has managed to earn a living doing television commercials but was unable to get the acting parts she really wanted. She decided to have botox injections in her forehead and collagen enhancements to her lips. After these procedures, her career improved dramatically and she received several movie offers. Ms. Gorgeous is sure that she should be able to deduct the cost of the cosmetic enhancements because she read about another actress having a face-lift in 1988 and deducting the cost on her tax return as a medical expense. Can Ms. Gorgeous deduct the cost of these procedures? Research Aid: Section 213(d)(9). Issue: Can Ms. Gorgeous deduction the cost of the botox injections and collagen enhancements as medical expenses? Conclusion: Ms. Gorgeous will not be allowed to deduct the cost of botox injections and collagen enhancements. Discussion of Reasoning and Authorities: Code Section 213 allows a deduction for expenses paid for medical care of the taxpayer. Section 213(d)(1)(A) defines medical care as amounts paid ―for the diagnosis, cure, mitigation, treatment, or prevention of disease or for the purpose of affecting any structure or function of the body.‖ Rev. Rul. 76-332, 1976-2 C.B. 81 allowed a deduction for cosmetic surgery for a face-lift under Section 213. However, the Code was subsequently amended by the Revenue Reconciliation Act of 1990. Under §213(d)(9)(A), no deduction is allowed for cosmetic surgery or other similar procedures, unless the surgery or procedure is necessary to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or disfiguring disease. Section 213(d)(9)(B) defines cosmetic surgery as any procedure which is directed at improving personal appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease. Thus, no deduction will be allowed. 77. [LO 2.4] Deducting Bad Debt Loss (can be solved using free Internet sources) Last year your client, Barney Bumluck, worked part-time for Timely Tax Return Preparation Service. Barney was promised an hourly wage plus a commission. He worked under this arrangement from early February until April 15. His accrued pay amounted to $900 plus $120 of commiss