Question

For the items below: using the code, regulations, and rulings answer the following questions. Your answer to these questions must be cited and be a primary source. 3. Shaun is a huge college football fan. In the past, he has always bought football tickets on the street from ticket scalpers. This year, he decided to join the university's ticket program, which requires a $3,000 contribution to the University for the "right" to purchase tickets. Shaun will then pay $600 per season ticket. Shaun understands that the price paid for the season tickets is not tax deductible as a charitable contribution. However, contributions to a university are typically tax deductible. Determine how much, if any, of Shaun's $3,000 contribution for the right to purchase tickets is tax deductible. 4. Benjamin, a self-employed bookkeeper, takes a professional CPA review course to help prepare for the CPA exam (earns no academic credit for it). Determine if Benjamin may deduct any of the cost of the CPA exam course and if so where would it be shown. 5. Pierre recently received a tax penalty for failing to file a tax return. He was upset to receive the penalty, but he was comforted by the thought that he will get a tax deduction for paying the penalty. Determine if Pierre is correct.

Answer 1

Q#3)

According to IRC Section 170(1), 80% of the amount contributed to a qualifying educational organization, which is contributed to the university for the right to purchase ticket, is tax deductible.

Therefore Charitable deduction available = $3000x80%=$2400

Note :$600 per season ticket is not tax deductible

Q#4)

CPA & book keeping are entirely different profession. Also It is not required to do any course for bookkeeping or for doing any business or trade under any law. CPA review course is for a different profession and not related to bookkeeping hence course fees will not be tax deductible . Here arise a need to leave the current profession and enter into new profession which is not related to current line of business.

Tax benefits related to education are stated in Publication 970

Q#5)

Penalty under sec 271F shall be levied if a person fails to file his return before the end of the relevant assessment year. No deduction shall be allowed for any penalty paid for the failure to file tax return or for violation of any law under IRS sec 162 (f). Hence Pierre's thought that he will get a tax deduction for paying the penalt is wrong.

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