Tax Obligations and Registered Payment (Discussion #1 and Discussion #2)
Discussion #1
Tax obligations tend to revolve around the generated income, with potential nullification manifesting in cases of losses. However, the involved firm would need to make preparations pointing to a drop in profitability following economic instabilities such as the mortgage meltdown. As a result, the firm would have to consider the issuance of a profit warning in preparation for the expectations of its clients (Bokhari & Geltner, 2018). Other measures geared towards the preparations of the returns following an economic crisis include ensuring taxpayers’ compliance in their return filings. Under the current status, the interests of the IRS would be the determination of concerns such as loss-reporting, tax arrears, and tax compliance concerns with prospective tax-holding perspectives (Flannery, 2016). On expectation, such outcomes would define the expectations of the company in preparation for its tax compliance documents. Also, the interests of the firm would further revolve around the existing tax claims associated with the previous financial periods.
References
Bokhari, S., & Geltner, D. (2018). Characteristics of depreciation in commercial and multifamily property: An investment perspective. Real Estate Economics, 46(4), 745-782.
Flannery, M. J. (2016). Stabilizing large financial institutions with contingent capital certificates. Quarterly Journal of Finance, 6(02), 165-176.
Discussion #2
The position adopted by Robust Company seemed to have stemmed from a position of business operations that followed the acquisition process. Their comprehension of the registered payment fetched its advice from the expectations of routine operations. As a result, the additional payments towards the infringement of patents comprised operational expenses. However, the position adopted by the IRS identified the claim of legal responsibility to involve practices attached to the acquisition of the company (Friesner et al., 2018). In essence, the IRS considered the registered payments to comprise prospective inputs of the acquisition process since the Robust Company had made a commitment to honor potential demands in patent infringement costs. As a result, the registered payments after the loss of the case amounted to ideal costs under capital expenses (Thomsen & Watrin, 2018). An ideal approach to treating the registered payments under operations cost would involve aligning their returns to the progressive revenue generation operations. In such cases, the registered payments pertaining to the infringed patent would amount to operational costs.
References
Friesner, D. L., McPherson, M., Schibik, T., & Brajcich, A. (2018). Identifying peers in international tax competition. Applied Economics Letters, 25(9), 584-587.
Thomsen, M., & Watrin, C. (2018). Tax avoidance over time: A comparison of European and US firms. Journal of International Accounting, Auditing and Taxation, 33(1), 40-63.
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Question 
Tax Obligations and Registered Payment (Discussion #1 and Discussion #2)
Discussion #1
Consider the following and provide thoughtful analysis and reflection: Suppose you were the CFO of Global Mortgage Corporation, a $100 billion investment company who made profits by investing in subprime mortgages. Global began business in 1995 and found great success surpassing the $100 billion mark in 2007. All of the companies’ “investments” in mortgages were secured by homes and business property mostly in California. In 2008, you see firsthand the devastation a mortgage meltdown is causing the economy, and your CFO wants to know how all of this will affect the tax situation at the end of the year. Being an up and coming controller, you jump on the task.
Tax Obligations and Registered Payment (Discussion #1 and Discussion #2)
For discussion: How would you prepare for this work assignment: what tools you would use, and how you could eliminate missing important concepts which could cause your company millions of tax dollars?
Discussion #2
Robust Company, Inc., acquired all the assets of Depleted Company, Inc. In addition, Robust assumed certain liabilities of Depleted. Robust agreed that it would be legally responsible for any judgment in a patent infringement claim being litigated against Depleted Company. Experts’ opinions indicated that the likelihood that a significant change and liability would result was remote (less than 10%). After a trial, the jury concluded that an illegal patent infringement had occurred, and it awarded the judgment of $5 million. Robust paid $5 million and deducted it as an ordinary and necessary business expense. Upon audit, the IRS classified the $5 million payment and treated it as a capital expenditure under IRC section 263.
For discussion: How would you evaluate the positions taken by Robust Company, Inc., and by the IRS? Support your positions by using the tax code, regulations, IRS rulings, and/or case law. Try to find a new approach not used by your colleagues.
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