Tax Research Problems

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Dear Sir/Madam,

The Tax System

A tax system is a government regulatory body that helps collect income from people and businesses. Taxes are usually imposed to increase mandatory contributions to the government by deducting fees from employee income, corporate profits, and financial transactions.

Giselle and the Tax System

Giselle is grown up and old enough to pay taxes to the government. The tax system is structured to allow the government to collect a portion of every transaction made. The process of sending fees to individuals involves some taxes, with the following exceptions: B. Transfer of International Aid Organizations, Educational Sponsorship and Assistance in Times of Disaster. Therefore, Giselle and her mother are subject to the tax system in several ways.

Tuition and Education Expenses

Giselle is a beneficiary of sponsorship to attend studies at the Sorbonne University in Paris, thus all her financial costs are paid in the sponsorship. The financial cover includes the tuition fees, medical coverage, and personal expenses. The taxation policy guidelines indicate that tuition fees of a student should be subject to taxes, particularly the student tax and fees deduction (US Tax Center).

According to the US taxation guidelines on tax deductions for tuition and education fees, the students should receive lower tax rates. The deductions are open to the people who pay the qualified academic expenses, people paying the expenses for an eligible student, and the individuals who pay for their studies or that of their dependents. However, a person is not able to claim deductions if the person's tax filing status indicates "married filing separately", if the modified adjusted gross income exceeds $80,000 and if the individual claims the American Opportunity tax credit or the Hope scholarship tax credit (US Tax Center).

Therefore, Giselle is liable to the tax deductions for the funds directed to the tuition and education. Giselle receives additional finances from sponsors namely medical and expenses funding which are liable to taxation. Notably, the tax deductions for tuition and education fees indicate that some expenses are liable for deductions while others do not qualify for exemptions. The education expenses that qualify for deduction include the tuition and related charges and the student's activity fees such books supplies. On the contrary, transportation, medical, personal, or living expenses do not get the tax deductions. Giselle thus qualifies for deduction on her tuition fees, but her personal expenses and medical costs are liable to taxation. The rules for taxing the students indicate that the tax benefits applied must be the same within a year, and the deductions are only for the tuition or fees and any student loan interests.

Earnings and Taxation

Giselle's earnings include the $10,000 received for offering SAT tutoring and $6,000 obtained from dividends and an additional $2,000 collected as interest in a US brokerage account. The high revenues are subject to taxation in different categories.

According to the federal taxation system, all the revenues received as payment for offering professional services are liable for taxation (US Tax Center). The professional services that are subject to taxation include consultation, legal advice, tutoring, and advisory provided by a registered professional service provider. Therefore, Giselle's revenue received from tutoring services is liable for taxation.

Further, the state tax policy states that tax rate is imposed on all dividends received by an individual. The dividends are issued from the savings made by an institution as a payment to the investors, thus they are liable for taxation because they serve as revenue to the beneficiaries. Notably, the dividends are grouped under income tax thus they should be taxed in compliance with the state taxation policy. Giselle also receives $2,000 interest for participation in brokerage services. The interest is liable for taxation because it is classified as a return for an investment made in the brokerage sector, thus should be taxed under the state policies. According to the taxation system, the revenues received from investment are liable for taxation (US Tax Center). Thus, Giselle should pay taxes for the stated revenues irrespective of her status as a student.

Giselle's Mother and Taxation

Giselle's mother receives revenue from her participation at Waterhouse Cooper as a business partner. According to the state tax policies, the revenues collected from participation in legal businesses including partnership and sole proprietorship amongst others is all liable to taxation. Therefore, the $600,000 received by Giselle's mother from her contribution in the partnership is liable for taxation by the state. Hence, the deductions should be made annually as compliance with the taxation regulations. The liability to tax deductions will result in the reduction in the revenue received from the partnership.

Further, the parents receive $40,000 dividends from US corporation, and the funds are subject to taxation. The taxation policy on dividend indicates that the earnings from dividends received from a corporation are liable for taxation (Cornell University Law School). Thus, the dividends should be taxed, and that would reduce the revenue they receive.

Lastly, the parents receive $20,000 interests from their joint account. The state tax policies state that the money received as interests obtained from savings in a bank account should be liable to taxation. Therefore, interest should be taxed, and this would have the effect of reducing the interest amount to be received.


From the above arguments, Giselle is liable to some taxes but she receives exemption on others. Also, her parents have tax liability on their receivable revenues including the dividends, interests, and partnership benefits.


Yours faithfully,


Works Cited

Cornell University Law School, The. "26 U.S. Code § 11 - Tax Imposed". LII / Legal Information Institute. N.p., 2017. Web. 14 May 2017.

US Tax Center, The. "Tax Deductions For Tuition And Education Fees". US Tax Center. N.p., 2017. Web. 14 May 2017.

March 15, 2023

Business Government


Management Economy

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Tax Taxation Audit

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