CPA Advice for Homer Simpson Homer Simpson Research Paper

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CPA Advice for Homer Simpson

Homer Simpson

FROM: CPA & Associates

Economic Substance and Moe's Business Plan

Mr. Simpson:

I appreciate your contact regarding economic substance and my recommendations as to if you should enter Moe's business plan. With such a large amount of cash taxed on your latest success, it is only obvious that you would want to protect and profit off of what remains. However, one must do so in good ethical standing. The rest of this memorandum serves the purpose of educating you into making the proper decision for yourself.

First and foremost, before entering any business transaction, one must understand the definition of "economic substance," which defined by the United States Treasury Department, means that one "gains tax benefits from a transaction that does not meaningfully change a tax payer's economic position.

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" The IRS has set up protections against such uncalled for reduction in tax liability under the 2010 Revenue Reconciliation Act, section 7701(o). In other words, there is protection against those that are purposely avoiding paying taxes. In order to lawfully enter this business venture with Moe, the IRS claims that the transaction should be relevant other than in the purpose of economic substance, the transaction changes in a meaningful way, and that the taxpayer have substantial purpose other than economically benefitting from the transaction.

Economic profit laws fight against tax evasion….....

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