A limited time offer! Get a custom sample essay written according to your requirements urgent 3h delivery guaranteedOrder Now
You can choose a movie from the list below. Your goal is to identify federal tax issues and how the tax law should be applied. Also, if relevant, discuss how the actions of the character involved would be altered if significantly influenced by the tax factors. Don’t try to do this project based on your recollection of the movie: you will overlook possible tax issues that way. The write up should be no longer than 7 double spaced pages. Your grade will reflect how well you identified the issues, how deeply you discussed them, how well you resolved them. The grade will also factor in your writing. The paper should be organized by identifying the tax issue, how it is dealt with in the movie and what the tax consequences are to the character.
Based on The Happy Gilmore movie Grandma Gilmore lost her belongings and house to the IRS for past due taxes in the amount of $270,000.00. Grandson Happy Gilmore saw an opportunity to get his Grandma’s house back by playing in a golf tournament so he can win enough money to pay off the IRS and get grandma Gilmore’s house back. At this point in April as the movie mention grandma Gilmore is in a nursing home and she is now a relative dependent to grandson Happy Gilmore even though she is not living in the same home as her grandson Happy Gilmore but he Is providing more than half of her support; and grandson Happy Gilmore is now entering the golf tournament. At the end of the 90 day grace period the IRS give Grandma Gilmore to come up with the back taxes grandson Happy Gilmore was able to put together $275,000.00 towards the payoff of grandma Gilmore house. Grandson Happy Gilmore raised $220,000.00 from the golf tournaments and raised another $55,000.00 from a subway sponsorship, these two amounts will be taxed differently, winnings verses sponsorship and respectively to the state the money was won in and if the state has federal and state taxes.
At this point; the end of the 90 days someone else out bid grandson Happy Gilmore, bidding $350,000.00 on grandma Gilmore’s house. Grandson Happy Gilmore challenged the bidder (which was another golf tour player) for the house in a game of golf which happened to be the golf tour championship game. Grandson Happy Gilmore won the challenge winning grandma Gilmore’s house back Valued now at $350,000.00 with a realized gain of $80,000.00 from the $270,000.00 owed to the IRS, and the prize money from the tournament as well, the movie did not say what the prize money was. Fast forward to the January of the next year; now there is two tax situations one for grandma Gilmore receiving the house back most likely as a gift from her grandson Happy Gilmore, so for tax purposes she will have to figure out the basis of the property and the gift tax, as such Fair market value second is for Happy Gilmore himself because he now has to pay taxes on the winnings, one the house of $350,000.00, second the golf game winnings of $220,000.00 and third the sponsorship from Subway of $55,000.00.
Since he is considered a pro golfer his itemized deduction will be greater than his standard deductions in 1996 of $5,900 which will include any normal and necessary expenses relating to him playing in the golf tour. If his accountant is any good he may pay very little in taxes and most of it would be against the house because the rest of his winnings and his sponsorship can be put into Roth IRA’s, regular IRA’s and Municipal bonds as a tax deferred vehicle for later retirement. But there is a time limit to roll his winnings in a tax deferred vehicle and since he was holding on to all the checks over the three month period some of the earlier checks maybe outside the allowed time window. Back to the house, the house will be taxed at the rate of the state the house is located in if grandma Gilmore does not determine the basis of the house then Happy Gilmore will have to pay income tax on the house, but due to this recent IRS situation it seems more than likely he would of been providing for grandma Gilmore for the rest of that previous year including property taxes from when he got the house back, so most likely Happy Gilmore will file head of house hold and claim the respective credits and deductions, one of them will be the dependency exemption of 2*$2,550 = $5,100 (as seen on 1996 1040), but at this time his taxable income cannot be deduced because his itemized deductions has not yet been identified.
If grandma Gilmore has enough income to support herself in the new year then grandma Gilmore can file for herself as single but she cannot file as qualified widow because grandpa Gilmore has been deceased for over 2 years and leaving no eligible dependents for grandma Gilmore. On the other hand if Happy Gilmore continues to provide more than half of grandma Gilmore’s support moving forward then Happy Gilmore can continue to file as head of house hold until he gets married or grandma Gilmore dies whichever comes first