Assessment 6 Applying the IRS Code Rules

Assessment 6 Applying the IRS Code Rules . Complete 6 problems that require you to apply research and knowledge of the rules and laws associated with at-risk or passive activity losses, as well as the individual alternative minimum tax (AMT).

Note: The assessments in this course are presented in sequence and must be completed in order. Do not complete Assessment 6 until you have submitted and received faculty feedback for Assessment 5.

Context

There is a separate tax system from the one you have been studying. The goal of this second system is to identify individual and corporate taxpayers who might escape paying taxes by using the Internal Revenue Code’s advanced tax incentives and programs. This alternative minimum tax (AMT) system employs rules based on a taxpayer’s AMT income. As you will learn, little income escapes the IRS.

Over the coming decade, a growing number of taxpayers will become liable for the AMT. Rather than affecting only high-income taxpayers who would otherwise pay no tax, the AMT has extended its reach to many upper-middle-income households. As more taxpayers incur the AMT, there will likely be increased pressure to reduce or eliminate the tax (CBO, 2010).

Reference CBO. (2010). The individual alternative minimum tax. Retrieved from

https://www.cbo.gov/sites/default/files/01-15-amt_brief.pdf

Questions to Consider

To deepen your understanding, you are encouraged to consider the questions below and discuss them with a fellow learner, a work associate, an interested friend, or a member of the business community.

Assessment 6 Applying the IRS Code Rules

• What are some advantageous rules individual taxpayers can employ to avoid the AMT? • How far in advance should a taxpayer develop a tax strategy? • Is developing a tax strategy something only high-income people should do?

Resources

Required Resources

The following resources are required to complete the assessment.

Capella Resources Click the links provided to view the following resources:

• Assessment 6 Problems.

Internet Resources Access the following resources by clicking the links provided. Please note that URLs change frequently. Permissions for the following links have been either granted or deemed appropriate for educational use at the time of course publication.

IRS.gov is the homepage for the federal IRS Web site. Use the tabs at the top of the page to navigate the site. The Interactive Tax Assistant and Tax Trails are tools that walk you through a series of questions to find answers to tax questions.

• IRS.gov. (n.d.). Retrieved from http://www.irs.gov/ • IRS. (n.d.). Interactive tax assistant. Retrieved from http://www.irs.gov/uac/Interactive-Tax-

Assistant-(ITA)-1 • IRS. (n.d.). Tax trails. Retrieved from www.irs.gov/Individuals/Tax-Trails%2d%2d%2dMain-Menu

Assessment 6 Applying the IRS Code Rules

Assessment Instructions

Note: The assessments in this course are presented in sequence and must be completed in order. Do not complete Assessment 6 until you have submitted and received faculty feedback for Assessment 5.

For this assessment, complete the following:

• Download the Assessment 6 Problems document, linked in the Resources under the Required Resources heading.

• Using the primary source of IRS.gov and the IRS Interactive Tax Assistant and Tax Trails (linked in the Resources under the Required Resources heading), locate and interpret regulations and publications that relate to each problem.

• Record your answers to the problems in a Word document. • Provide an explanation for each answer.

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• Submit the Word document containing your answers to the problems and the explanations for your answers.

How to use the scoring guide

Applying the IRS Code Rules Scoring Guide

Use the scoring guide to enhance your learning.

ACTIVITY

Assessment 6 Applying the IRS Code Rules

Correctly calculate the initial basis, allowed losses, and ending at-risk amounts.

Correctly explain how to treat a loss on a federal income tax return.

Correctly calculate what can be deducted on a final income tax return.

Correctly calculate the loss disallowed by at-risk rules and how much of the loss is disallowed by the passive loss rules.

Correctly explain the tax effect in a specified scenario for the last year and the current year.

Correctly calculate itemized deductions for AMT purposes and identify the amount of the AMT adjustment.

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