Solve the tax issues presented below using the CCH Tax research software . Resea
ID: 2419144 • Letter: S
Question
Solve the tax issues presented below using the CCH Tax research software.
Research Problem 3
Requirements:
ACME Chemicals was recently fined $10 million by the EPA for a chemical spill. As part of the settlement, $8 million of the fine was placed into a private charitable trust for the area affected. The wording of the settlement identified the donation as ‘satisfaction of a condition of probation’ and specified that without the donation the full fine would be payable to the EPA. ACME Chemicals incurred $50,000 of legal expenses during the process of defending itself.
Research the following issues:
Issue 1: What amount of business expenses can ACME Chemicals deduct regarding
this event?
Issue 2: What amount of charitable contributions can ACME Chemicals deduct
regarding this event?
Report the results of your research using the following format: Facts (these can be copied from 1 above).
Issues (stated in 2 above). List as Issue Issue 1:
Issue 2:
Conclusion (Usually "yes" or "no." A brief explanation is sometimes included.)
Conclusion 1:
Conclusion 2:
Authority: Usually, the authority is copied from the source and pasted into your report in the appropriate place. Important parts of the authority may be underlined or highlighted. The research report is to be useful, not necessarily beautiful.
Please use word processing software to write up your report. Convert your research Report to a .pdf document.
Explanation / Answer
Total Fined = $10 milion Fined placed from trust = $8 milion Legal Expenses = $50,000 Issue 1 Amount of Business expense = $50,000 Issue 2 Amount of charitable contribution = 0 [Because any payment in the nature of fine paid by trust should not be amounts to contribution]