discussion question 900
ACCOUNTING
1. Three Types of IRS Audit (Examination)
3. Taxpayer filing requirements/due dates
4. Tax avoidance VS. Tax evasion
8. Ethics
Agnes Meher is the owner of LuPat, a profitable construction company that she operates as a sole proprietorship. As a sole proprietor, Agnes reports the business income from LuPat on her individual tax return. Agnes expects the business to generate $400,000 of taxable income this year, which in combination with her other income, will put her in the top tax bracket (39.6%). Agnes has two children named Ellie Mae and Spencer, ages 9 and 11 respectively, who do not currently have any taxable income. Agnes would like to shift some of her income from LuPat to Ellie Mae and Spencer to reduce the overall tax burden from the business income. To shift the income, Agnes hired Ellie Mae and Spencer to perform some janitorial and clerical services for LuPat, paying each child $20,000. What do you think of Agnes’s strategy?
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