Question

During her vacation, Janita found a gold bar from a sunken ship while she was scuba diving off Texas. Discuss the Tax problem in 2 or 3 paper

identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences issue

Answer 1

As discussed in the given case that Janita found a gold bar from the sunken ship. It is the case of unexpected cash flows and as per IRS Code section 61 of the federal tax law all the gains should be considered while calculation of gross income from all the sources. Since the gold bar would result in the increase of cash flows and will be added in her gross income for the period she found it while she was scuba diving off Texas, she is required to pay the income tax as per policies of the Texas State and federal laws.

• Janita has to pay the income tax applicable on the gold bar according to the taxation policies and implication in the Texas state.
• Gold bar found by the Janita is the result of unexpected or sudden cash flows hence it will be taxable as per federal and state law. Janita assets will increase by the estimated value of the gold bar and hence she need to pay income tax on all the transactions which increases the gross income.
• Janita total taxable income will increase as she found a gold bar in the sunken ship. She must disclose all the sources of her income while computation of her taxable income including gold bar found in the sunken ships. All the tax implication mentioned for gold bar are to be considered while evaluation of total tax paid during the period.