For the Following Tax Returns, Identify Which of the Three

question 30

Essay

For the following tax returns, identify which of the three audit types will most likely be utilized.
a. The IRS selected Don's return for audit because of his high itemized deductions. The IRS would like documentation of these deductions.
b. Large Public Corporation is a very large publicly traded corporation. It is involved in many complex transactions that have significant tax ramifications.
c. George and Barbara operate a small business out of their home. The IRS has identified a couple of issues that may relate to their business.
d. The IRS selected Bill and Hillary's tax return for review because of some of their investment sales. They would like a better understanding of the transactions and parties involved.

---

Definitions:

Rent Out

The act of leasing or renting one's property to another party in exchange for payment.

Joint Costs

Costs that are incurred in the process of producing two or more products or services simultaneously and are not readily assignable to individual products.

Inventory Valuation

The method used by businesses to assess the value of their inventory, taking into account the cost of acquiring or producing the goods and any market changes.

Profitability of Joint Products

The assessment of earnings from products that are produced simultaneously from the same process and cannot be distinguished cost-wise until a certain point of production.