Tax planning clients Case Study Example | Topics and Well Written Essays - 1000 words

Tax planning clients - Case Study ExampleThe earnings toughened aside would be deposited in the flexible spending account and would be free of tax. That is, the funds deposited in the flexible spending account be not subject to taxation. According to the FSA provisions, the whole amount deposited in the flexible spending account should be spend within the coverage period specified other than the non-spent amount is forfeited or subjected to taxation. According to the case, the couple never funded their flexible spending account therefore, all in all their transactions are subject to tax. Below are questions and answers in reference to tax provisions.Q1 in general, if the damages pull in is to be paid to the beneficiary at once, the amount is not subject to tax. However, if the restitution benefit is paid in monthly instalments, any interest that accumulates on top of the face value is taxable. By general law, life insurance benefits are excluded from tax. If, at the time of d eath, the owner of the insurance insurance policy is the deceased, the insurance benefits are subject to tax (estate tax). However, if the deceased is not the owner of the insurance policy, at the time of death, the benefits are not subject to tax. With respect to the case in consideration, Tom was the owner of the life insurance policy at the time of his death. Therefore, Josephine would be required by the IRS to claim the face value of the life insurance for both federal and state tax purposes (Lal & Lal 56-120).Q 2 any amount spent by an someone on medical examination services is supposed to be reimbursed provided there is a scheme to that effect. In general, unreimbursed medical disbursals are tax deductible. That is, the monetary worth of the medical service should be deducted from the gross income. If the amount spent by the Marchs on medical services is 10% of their adjusted gross income, they should deduct the unreimbursed medical expense from their gross profit. This mo ve will reduce their gross