Please cite applicable laws PART I: Years 2010 and 2011 (25 points) In 2010, Jack graduated law school in Boston in May, and decided to move to New…

PART I: Years 2010 and 2011 (25 points) 

In 2010, Jack graduated law school in Boston in May, and decided to move to New York City immediately to work at a law firm there. He rented a U-Haul and took all his belongings with him to the city, where he moved into a small studio apartment. The move cost him $1,200. 

The position he took in New York started at $75,000 the first year, while he studied for the bar. Once he passed the New York State Bar Exam he would be considered a first-year associate, and his salary would increase to $90,000 in that first year as an associate. 

Jack works at the firm basically as a paralegal until he can pass the bar. His student loans begin to start in November of 2010, six months to the date of his graduation. He has already asked for consolidation of his loans, and to be put on an income based repayment plan. He timely makes a $700 monthly payment on his student loans starting November 15, 2010, and continuing on the 15th of every month thereafter. Of those $700 payments $500 is for interest on the loan. 

Jack took the New York State Bar Exam in February of 2011, and miraculously passed the first time. The law firm gave him the promotion to first year associate at that time. The firm also paid his bar association dues and explained that any continuing legal education courses he may need to take to maintain his license would need to be approved by the firm for reimbursement. 

Jack was then paired with a senior associate, Ryan. Ryan worked on a lot of corporate clients and was required to travel to the client’s offices fairly regularly. Sometimes the clients were in the city, but sometimes they were upstate. As Ryan was required to travel, so too was Jack while working on these cases with him. 

If Jack and Ryan traveled to a client’s office in upstate New York, they usually took lodging at a local hotel and scheduled a rental car for the trip. (Both live and work in the city, and neither owns their own car.) All of these expenses are charged to a company card, as well as any meals they take while traveling. 

Jack quickly becomes a stand out of the first-year associates at the firm. The firm is trying to grow in new areas, and they want to have a stronger footprint in the taxation practice of the firm. They decide that since Jack is doing so well with their corporate clients, his further knowledge in taxation could bring in additional revenue with already existing clients. There is a taxation seminar that the American Bar Association provides ever year in Miami and they ask him to attend. The seminar is for a week in November, and it provides all updates in corporate and individual taxation as well as provides networking opportunities with tax lawyers that are deemed to be experts in several areas of tax law. The seminar is geared to all levels of tax lawyers, as it has various topics for beginners through seasoned tax attorneys. 3 

Jack jumps at the chance to go, especially since he hasn’t had a vacation since he started the firm back in 2010. He asks if he could leave for this seminar the Friday before (it begins 9AM on Monday), and the firm agrees. The company will reimburse him for the airfare, lodging, and meals that he takes during the trip. 

Jack departs JFK on a Friday morning and gets into Miami by noon. He immediately takes in the sun and sand for a much-needed long weekend. On Monday, he is at the seminar promptly at 9AM and attends all of the discussions offered for the week. He flies back to New York City on the Saturday morning after the seminar. That next week he begins to work with a senior associate in tax, Marvin. 

At the firm’s Christmas party in December, all the associates are given a $100 gift card to Amazon.com and a bottle of wine. There are also special gifts given out to those partners, associates, and staff the firm feels have went above and beyond for the firm during the year. Jack has been singled out as the rising star of the first-year associates and has been given a voucher for a week’s trip to Paris, which he can use at any time over the 2012 year. The voucher is worth $5,000 and includes airfare, hotel and museum passes. Jack, of course, accepts this gift and thanks the firm wholeheartedly. 

Part I Questions: 

  1. (a) If you were Jack’s tax advisor, what would you tell him he needs to report as gross income during the years 2010 and 2011 and what are deductions that he is allowed to take during those years? 
  1. (b) What about the law firm’s tax implications for the years in question? 

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