Tax Memos Essay Example | Topics and Well Written Essays - 500 words

Tax Memos - Essay Example Under Section 1212, Anita will be entitled to carry forward this capital loss to succeeding years, provided there is a net loss including all other similar type of transactions involving capital transfer. Moreover, Anita can claim a deduction of $600 from taxable income, since it is well within the limits amounting $3000, under Section 1211 (Cornell University Law School, â€Å"Limitation on Capital Losses†). While analyzing this situation, Anita, being a taxpayer has to refer to Section 267 of US Code of taxation, if she wants to sell the stocks to her sister, Kathy (Cornell University Law School, â€Å"Losses, Expenses and Interest with respect to transactions between Related Tax Payers†). Under Section 267, Kathy would be considered as a related party in this type of transaction between the two, Anita and Kathy and hence the amount of deduction will not be available then. However, sale of the stocks to her friend, Marcia will not attract Section 267. Marcia and Dave, who are married to each other is planning for a divorce agreement. They have two children and will be in the custody of Marcia after their separation. In accordance with the divorce agreement Dave decides to keep the boat and give away the home to Marcia. Dave and Marcia will also have to decide upon whether Marcia will be receiving the stocks which were acquired at $100,000 and having a present market value of $150,000 or in the form of yearly payments to Marcia for 5 years, with an included yearly interest @ 8% p.a. On analyzing this situation, the first consideration would be the tax consequences as a result of the transfer and settlement of properties. The immediate tax implications will be nil because Under Section 1041, any transfer of property within 1 year of the divorce will not amount to any gain or loss. However, it can have an effect in future, after 1 year, when either the home or the boat is sold by any of them and it can attract capital