Question

Facts: Casey Jones is a 2012 graduate of Tulane University Law School and admitted to practice law in the state of Louisiana. He has been employed by the family general practice law firm of Jones, Jones, and Jones since graduating law school. The firm’s three partners are Casey’s mother, father and uncle. Casey is one of seven other lawyer associates in the firm, which includes a cousin, and five other unrelated persons. There are also 5 non-lawyer clerical staff. No one at the firm has any specialized training in tax matters, but Casey has been trying to handle at least some simple tax issues for the firm. The partners had decided that it would be very good for business if they could establish a tax practice specialty within the firm. As a result, the firm sent Casey to the LL.M (tax) program at the NYU law school to earn an LL.M. degree in taxation. He attended from September 2018 to June 2019, at which time he graduated with the degree of Master of Laws in Taxation (LL.M). While he attended the program in New York the firm continued to pay him his $125,000. per year salary, his tuition and fees of $63,000 and $34,000 of living expense for rent and food at one of the NYU Law School dormitories, as well as his travel expenses to and from New York. Half was paid in 2018 and 2019. Upon graduation he returned to his firm’s New Orleans offices where he worked to establish their tax department. It is now time to file his return for 2019.

Questions:

1. What are the tax effects, if any, of these transactions on Casey and his law firm?

2. Would the result be any different if Casey were a CPA graduate of Tulane’s business school with a BA degree in accounting, and the degree he earned at NYU was a Masters in Tax in accounting in their business school, and Jones, Jones and Jones was a CPA firm?

Answer 1

8