Question

Ted Mosby is a professor at Columbia University where he teaches architecture. Although Ted enjoys his job, the administration at Columbia University and him do not get along. The administration is sick and tired of Ted’s business venture, Puzzles Bar and Grill, taking up all of his time outside of class. Since the administration wants Ted gone, they offer him a $300,000 payment to Ted and, in return, Ted would relinquish his tenure and resign. Ted decides to take them up on their offer and accepts the $300,000 payment.

Marshall Erickson, Ted’s lawyer friend, advised him that “tenure” is a long-term capital asset and Ted should recognize a long-term capital gain on the $300,000 payment for tax purposes. Marshall is an environmental lawyer at the National Resource Defense Council and knows little about tax law though. Also, Barney Stinson, Ted’s business executive friend, is convinced the $300,000 payment should be ordinary income because Ted’s employer is paying him. Barney and Marshall get into a heated argument and the argument results in a “slap-bet” between Marshall and Barney on who is right about the character of the $300,000 payment for tax purposes.

A. RULE OF LAW: A review of the tax authorities

Legislative Authority- The Internal Revenue Code (IRC)

Administrative Authority- Regulations, Revenue Rulings

Judicial Authority-Court Cases

B. Select at least one case from your Rule of Law section and look it up in the Citator. Give a brief summary of what has happened to the case since it was rendered. What was the original court of jurisdiction? Was it appealed? Have other cases made reference to the case. If so, were the references favorable or unfavorable?

Answer 1

According to the facts of given case, Ted Mosby is  professor at columbia University where he teaches . As Administration wants ted to relinquish his tenure & resign for $ 300,000 which ted accepts.

As Ted decides to relinquish his right over job for some amount of money that deemed to be purely termed as Ted's Income for the year.

Here in given Case, Two different concepts on its taxbility is underlined by two different people but as per Income tax act, the given income shall be taxable under the Income from business & profession. hence Barney's opinion is correct on its taxability as the income is generated under the employee & employer relation i.e under a professional agreement to do so hence it shall be charged under the INCOME FROM BUSINESS & PROFESSION..

B)Judicial Authority-Court Cases

in given case AS per juristiction authority ,ted has to file return of income chargibility under income from business & profession.so he should pay tax accordingly.