Tax Research and Analysis


Question #1
Herbert Fancypants, a popular professional golfer, has become known for the knickers (not underwear; Google/Bing it) he wears in each golf tournament. This attire has become his trademark; however, he has no trademark protection under any applicable law. Nor is there any requirement under golfing rules that he wear anything other than “appropriate attire suitable to the profession.”
Are the purchase and cleaning costs of the knickers deductible to Mr. Fancypants? Please cite all resources in your research to support your conclusion.
Question #2
Mr. Gates is the president of an established and successful company. The company pays Mr. Gates $1,000,000 in salary each year. Mr. Gates, a renowned philanthropist, has directed the board of directors to pay him nothing for the year and instead, use the $1,000,000 to which he is otherwise entitled to create a scholarship fund. The fund, which he would help oversee, would be used to create scholarships for worthy high school students otherwise unable to afford college.
What are the tax ramifications to Mr. Gates and to the company? Please cite all resources in your research.
Question #3
Mr. Stark received $25,000 in disability payments while he was recuperating from heart surgery. Mr. Stark, age 65, is an employee with a large corporation providing general business consulting services. The corporation has always paid for the disability insurance of its employees. Mr. Stark telecommutes and works out of the home. From further conversations with the client, you discover that only $10,000 of the disability payments received by Mr. Stark arise from a disability policy paid for by his employer under a group disability policy. The remaining $15,000 was paid on a separate policy that Mr. Stark purchased several years ago. Mr. Stark has been paying semiannual premiums on the separate individual policy. You are asked to prepare Mr. Stark’s return.
What are the tax consequences of Mr. Stark receiving the payments discussed above?
What are your conclusions and reasoning upon which they are based (cite all work)?