+
SUPPOSE YOUR CLIENT, MARITZA, IS AN UNMARRIED INDIVIDUAL U.S. TAXPAYER LIVING IN NEW YORK CITY

SUPPOSE YOUR CLIENT, MARITZA, IS AN UNMARRIED INDIVIDUAL U.S. TAXPAYER LIVING IN NEW YORK CITY

Rating:
Rating
(0)
Author: Christine Farr
Description:

http://theperfecthomework.com/suppose-your-client-maritza-is-an-unmarried-individual-u-s-taxpayer-living-in-new-york-city/

Suppose your client, Maritza, is an unmarried individual U.S. taxpayer living in New York City. She informs you that she recently entered into a settlement agreement with her investment advisor. The investment advisor has paid Maritza $150,000. The payment is attributable to investment losses caused by the investment advisor’s alleged failure to follow the asset allocation directions from Maritza. Specifically; Maritza instructed her advisor to change the investment objective for her account from “all equity” to “current income.” The advisor understood these instructions to mean reallocate her portfolio from equity to income gradually over time, rather than an immediate sell off and restructuring. Maritza claims that her intention was to do an immediate sell off and restructuring. Hence, a dispute arose with respect to the correct interpretation of her instructions and the decline in market value of the equity position over the length of time it took her advisor to gradually sell (restructure) her equity portfolio to income. Maritza says this could have been avoided had the change in asset allocation been implemented immediately the way she wanted. In the interests of both parties in settling the dispute without admission of fault by either party, the investment advisor agreed to pay Maritza $150,000.
 
Maritza (the payee) wants to know the following:
Is this settlement payment taxable for federal income tax purposes?
                                   And
If so, what is the character of the payment? Is it a reduction of tax basis of investment assets, ordinary income, or short or long-term capital gain income?


(more)
See More
Try a College Course Free

Sophia’s self-paced online courses are a great way to save time and money as you earn credits eligible for transfer to over 2,000 colleges and universities.*

Begin Free Trial
No credit card required

25 Sophia partners guarantee credit transfer.

221 Institutions have accepted or given pre-approval for credit transfer.

* The American Council on Education's College Credit Recommendation Service (ACE Credit®) has evaluated and recommended college credit for 20 of Sophia’s online courses. More than 2,000 colleges and universities consider ACE CREDIT recommendations in determining the applicability to their course and degree programs.

Tutorial