QUESTION 2(multiple choice – choose one)According to the Senate Finance Committee Report, a reason for the enactment of IRC ?259 was:a. To address public outcry at the tax avoidance (or perceived tax avoidance) scheme publicized by Estee Lauderb.????o treat transactions the economically resemble the sale of long stock as taxable transactionsc. To treat the holding period of assets subject to a constructive sale as if such assets were originally acquired on the date of such constructive saled. To prevent taxpayers from avoiding the recognition of gain on “open transactions”e. All three of a, b and d are reasons IRC ?259 was enacted according to the Senate Finance Committee ReportQUESTION 3Taxpayer has entered into a contract with Financial Institution (“FI”) in which Taxpayer will receive 75% of the fair market value (“FMV”) of publicly traded stock (“X”).?axpayer will be required to deliver the stock to Financial Institution in 5 years depending on the FMV of the stock at that time.? stock currently trades at $100 per share, and Taxpayer has 10,000 shares.?herefore, the current FMV is $1,000,000.?axpayer receives $750,000 and under the contract is obligated to: (i) transfer all 10,000 shares to FI if X trades below $100 in 5 years, (ii) transfer stock with a FMV of $1,000,000 to FI if X trades between $100 and $110 in 5 years, or (iii) transfer 9,090 X shares owned if X trades at $110 or above in 5 years.?axpayer had the option to settle in cash, as opposed to actually delivering the shares.?axpayer’s accountant is also the accountant for Taxpayer’s father (who also owns a substantial amount of X stock).?nknown to Taxpayer, FI has a guarantee from Taxpayer’s father that he will loan 10,000 shares of X stock to FI for 5 years (which FI plans to use in a hedging transaction).What is the significance of father’s guarantee to loan FI 10,000 shares of X stock during the 5 year period??UESTION 4Same facts as in question 3:Taxpayer has entered into a contract with Financial Institution (“FI”) in which Taxpayer will receive 75% of the fair market value (“FMV”) of publicly traded stock (“X”).?axpayer will be required to deliver the stock to Financial Institution in 5 years depending on the FMV of the stock at that time.? stock currently trades at $100 per share, and Taxpayer has 10,000 shares.?herefore, the current FMV is $1,000,000.?axpayer receives $750,000 and under the contract is obligated to: (i) transfer all 10,000 shares to FI if X trades below $100 in 5 years, (ii) transfer stock with a FMV of $1,000,000 to FI if X trades between $100 and $110 in 5 years, or (iii) transfer 9,090 X shares owned if X trades at $110 or above in 5 years.?axpayer had the option to settle in cash, as opposed to actually delivering the shares.?axpayer’s accountant is also the accountant for Taxpayer’s father (who also owns a substantial amount of X stock).?nknown to Taxpayer, FI has a guarantee from Taxpayer’s father that he will loan 10,000 shares of X stock to FI for 5 years (which FI plans to use in a hedging transaction).Does father’s guarantee have any effect on Accountant as it relates to Accountant’s preparation of?axpayer’s?ncome tax return??UESTION 5Taxpayer A, participated in day-trading throughout the 2021 tax year, including many short sales.? relies on his on-line trading platform to keep track of A’s stock, sales, dividends and interest received.?nfortunately, the trading platform used by A, called Cinderella, went bankrupt towards the end of the year and did not provide A with a form 1099-B for 2021.? has kept only scant records of his on-line transactions.?hat should A do??UESTION 6Taxpayer A (“A”) tells Accountant that A takes all of Taxpayer A’s salary ($100,000) and immediately converts it to a virtual currency when earned.?A provides Accountant with all information necessary to include all salary as income on A’s income tax return).? tells accountant that A is a true believer in virtual currency and does not trade virtual currency for profit.? however, does mention that A uses virtual currency only at vendors who directly accept it and that A uses virtual currency to pay mostly for A’s basis needs (utilities, food etc…).?axpayer A is ready to file A’s income tax return and report $100,000 Gross Income (salary).? has made no financial transactions other than salary.?oes Accountant have an obligation to question Taxpayer A about his use of virtual currency to any extent??f so what??usinessAccounting
