Need 1-2 paragraphs 33. Go to the IRS website (www.irs.gov) and redo Problem, l

Question

Need 1-2 paragraphs 33. Go to the IRS website (www.irs.gov) and redo Problem, l interactive"Fill-in Forms"Schedule B. Print out the completed Schedule B SEARCH 1. Professor Vanessa Lazo received a free tour to Costa Rica in a drawing at a professional conference. Professor Lazo has asked for your heip in determining whether the free tour that she received is taxable. She understands that prizes and awards are taxalbl income to the recipient, but she does not think the free tour qualifies as a prize or award and is, therefore, not taxable. Required: Go to the IRS website (www.irs.gov) and locate Publication 525. Review the section on Miscellaneous Income. Write a letter to Professor Vanessa Lazo stating whether the free tour is taxable. If it is taxable, be sure to include in your letter where the income must be reported and the dollar amount. (An example of a client letter is available at the website for this textbook, located at www .cengagebrain.com.) OUP 4: MPREHENSIVE PROBLEMS 1. Bev and Ken Hair have been married for 3 years, They live at 15

Explanation / Answer

To: Professor Vanessa Lazo

Date: Not Provided

Respected Madam Professor,

It is a matter of pleasure, that you have won a free tour to Costa Rica. As you asked to us regarding determining the taxability of free tour received by you, we in competence of a tax advisor can make it clear that the free tour received by you is fully taxable as per rules of Internal Revenue Services.

It is taxable under heading of other income. Publication 525 of IRS make it clear that free tour received is as taxable to you as prizes and awards received by you. It has to be reported in form 1040 while you filed your tax return.

Now, we come on the taxable value of the tour received by you IRS says that the value of free tour received by you will be the fair market value of that tour. Fair market value is a value of a benefit that you have to pay to a third party if you not get that in free. You can derive the value by asking a free invoice for the tour from the tour organizer agency. So by this you can derive the fair market value of the free tour received by you.

Now comes to, where you have to show this amount in tax return. You have to report this fair market value of amount on line number 21 of form 1040 under heading of other income, where report the nature of income as “free tour” and report fair market value in amount.

Please find above useful.

Thanks

Yours Sincerely

(Tax Advisor)

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

---

---

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