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TEST BANK FOR Solutions to Develop Research Skills Problems
Taxation for Decision Makers 2017th Edition by Shirley
Dennis-Escoffier, Karen A. Fortin| Chapter 2 to 12
Chapter 2-12
Chapter 2
The Tax Practice Environment
Solutions to Develop Research Skills
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
,2 Taxation for Decision Makers Research Solutions
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.
, Solutions to Develop Research Skills Problems 3
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 commissions. When he
went to collect his pay, however, he found only a vacant
office with a sign on the door reading ―Nothing is sure but
death and taxes.‖ Can Barney take a bad debt deduction for
the wages and commission he was unable to collect?
Research Aid: Reg. Section 1.166-1(e)
Issue: Can Barney take a bad debt deduction for the
wages and commission he was unable to collect?
Conclusion: Barney will not be permitted a deduction
, 4 Taxation for Decision Makers Research Solutions
since the wages and commission were not previously
included in his return as income.
Discussion of Reasoning and Authorities: Under Reg.
§1.166-1(e), worthless debts arising from unpaid wages,
salaries, fees, rents, and similar items of taxable income
shall not be allowed as a deduction unless the income has
been included in the return of income for the year for
which the deduction as bad debt is claimed or for a prior
taxable year. Because Barney did not previously include
the wages or commission in income, he is not entitled to a
deduction for his inability to collect these items.
78. [LO 2.4] Deducting Charitable Contributions (can be solved
using Checkpoint® or a similar service) Your clients, Sonny
and his wife Honey, believe in worshiping Ta-Ra, the Sun
God. To practice their religious beliefs, they take a weeklong
trip to Hawaii to worship Ta-Ra. The cost of this pilgrimage
(including airfare, hotel, and meals) is $2,800. Sonny wants to
know if he can deduct the cost of this trip as a charitable
contribution to his religion.
Note to Instructor: No research aid is provided in the
textbook for this problem. This allows you to choose whether
or not to provide any hints to your students.
Research Aids: Kessler, 87 T.C. 1285 (1986)
TEST BANK FOR Solutions to Develop Research Skills Problems
Taxation for Decision Makers 2017th Edition by Shirley
Dennis-Escoffier, Karen A. Fortin| Chapter 2 to 12
Chapter 2-12
Chapter 2
The Tax Practice Environment
Solutions to Develop Research Skills
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
,2 Taxation for Decision Makers Research Solutions
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.
, Solutions to Develop Research Skills Problems 3
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 commissions. When he
went to collect his pay, however, he found only a vacant
office with a sign on the door reading ―Nothing is sure but
death and taxes.‖ Can Barney take a bad debt deduction for
the wages and commission he was unable to collect?
Research Aid: Reg. Section 1.166-1(e)
Issue: Can Barney take a bad debt deduction for the
wages and commission he was unable to collect?
Conclusion: Barney will not be permitted a deduction
, 4 Taxation for Decision Makers Research Solutions
since the wages and commission were not previously
included in his return as income.
Discussion of Reasoning and Authorities: Under Reg.
§1.166-1(e), worthless debts arising from unpaid wages,
salaries, fees, rents, and similar items of taxable income
shall not be allowed as a deduction unless the income has
been included in the return of income for the year for
which the deduction as bad debt is claimed or for a prior
taxable year. Because Barney did not previously include
the wages or commission in income, he is not entitled to a
deduction for his inability to collect these items.
78. [LO 2.4] Deducting Charitable Contributions (can be solved
using Checkpoint® or a similar service) Your clients, Sonny
and his wife Honey, believe in worshiping Ta-Ra, the Sun
God. To practice their religious beliefs, they take a weeklong
trip to Hawaii to worship Ta-Ra. The cost of this pilgrimage
(including airfare, hotel, and meals) is $2,800. Sonny wants to
know if he can deduct the cost of this trip as a charitable
contribution to his religion.
Note to Instructor: No research aid is provided in the
textbook for this problem. This allows you to choose whether
or not to provide any hints to your students.
Research Aids: Kessler, 87 T.C. 1285 (1986)
