Assume a relative asks for your tax advice (after all, you t

Assume a relative asks for your tax advice (after all, you told them to ‘just ask!’),or assume you are responding to a client as you write a letter on one of thefollowing cases. For each case, identify the tax issues, which issues may be ethicalissues, what advice you would give the taxpayer, and measure the tax cost/savingsof your advice (assume a marginal tax rate of 15%). Realize that they are lookingto you for an answer, so your letter should provide an answer of what they shoulddo with the reasoning of why and the support for your reasoning. Case 1. Chris wants help in figuring her gross income for the year. She wasunemployed as the year began and collected $2,000 unemployment. She later gota job as a manager for Ark Communications, Inc. She earned $55,000 in basesalary. He boss gave her a bonus check of $5,000 at Christmas. She decided tohold onto the check and not cash it so that it would not be taxable for this year.She also got fringe benefits on her job including a gym membership that costs $400a year. She received a gold watch worth $300 for managing her department withthe least accidents during the year.But her good luck did not end there. She found $5,000 in cash in the parkinglot one day and kept it, of course. She also won $8,000 in a drawing at a localgrocery store which sent her a 1099. But, she also won about $6,000 cash playingpoker with a group of friends on Friday nights and her friends don’t issue 1099s. Case 2. Your sister Crystal called; she lives in Maryland. She said she went to apaid tax preparer that has a booth in their Walmart store. The preparer displayed adocument showing she was a Registered Tax Return Preparer in good standing whohad passed an IRS exam.Normally Crystal files single with a standard deduction. The preparer, Sue, askedher if she received any income other than the $46,200 she earned at a localpublishing house. Crystal told her she received about $5,200 total in several cashpayments from people she knew who were writing books and wanted her to editthem. Sue told her that since Crystal was not receiving a form 1099 for the cashpayments, she would not need to report that amount. She also told Crystal thatthere were ‘standard amounts’ that would be accepted by IRS for itemizeddeductions even if Crystal did not have receipts. Sue estimated that Crystal couldtake the ‘standard ‘ amounts totaling $7,150 in itemized deductions.Consequently, Crystal was going to get a much bigger refund that she expected butshe really needs the money because she has some elective medical procedures thatshe will pay for. She wants to know what she should do in this situation? Case 3. In March, Jim, a firefighter, was injured in the line of duty. Theinjury was a result of interference from a shop owner. He incurred medicalexpenses of $14,800 related to the injuries. The shop owner’s insurancecompany offered, and Jim accepted, $34,800 and acknowledged that the$20,000 above medical costs was to avoid court proceedings and aotentially higher punitive damage awards. Jim prepared and filed hisincome tax return for the year and included the medical expenses but didnot include the insurance settlement since it came after the tax return wasfiled. What is the ethical issue in this case? What advice would yougive Jim? What are the tax costs of his options? Case 4. Maggie and her husband Hank own a condo in Del Mar, California.During the horse racing season, they rent their condo to wealthy Saudi’swho come to Del Mar for two weeks. Maggie and Hank receive $16,000 forthe two weeks in rent and they go to Sacramento and visit relatives duringthe rental period; they live in the condo when not rented. This year, therenter’s asked Maggie and Hank if they could stay an additional two daysbecause one of their children was too ill to travel. Maggie and Hank agreedbut did not charge additional rent. When Maggie and Hank returned to theirDel Mar condo, they found the renter’s left a wonderful fruit and flowerbasket with a card thanking them for their hospitality and a check for $2,000which was in addition to the $16,000 rent already paid. In talking to Maggieand Hank, you learned that the prorated portion of mortgage interest andreal estate taxes for 16 of 365 days is $1,155. Other expenses during the 16days (utilities, maintenance, etc.) totaled $1,940, and the prorateddepreciation was $1,826. Their marginal tax bracket is 25%. What is theethical issue in this case? What options do Maggie and Hank have inreporting the rental income? What is the cost of each option? What is youradvice?Grading of Letter The letter must be in a business format, and use proper grammar,punctuation and spelling. Cite tax authority for your decisions/advice in the body ofthe letter or in footnotes. Length depends on your topic and arguments butgenerally, 2-5 pages. The general rule in business is to make it long enough to getthe message across and no longer. Simulated address for the letter is:Client or relative name4700 College Oak DriveSacramento, CA. 95841