On July 24 of the current year, Sam Smith was involved in an accident with his business use automobile. Sam had purchased the car for $30,000. The automobile had a fair market value of $20,000 before the accident and $8,000 immediately after the accident. Sam has taken $20,000 of depreciation on the car. The car is insured for the fair market value of any loss. Because of Sam?s history, he is afraid that if he submits a claim, his policy will be canceled. Therefore, he is considering not filing a claim. Sam believes that the tax loss deduction will help mitigate the loss of the insurance reimbursement. Sam?s current marginal tax rate is 35%. Write a letter to Sam that contains your advice with respect to the tax and cash- flow consequences of filing versus not filing a claim for the insurance reimbursement for the damage to his car. Also prepare a memo for the tax files. Sam?s address is 450 Colonel?s Way, Warrensburg, MO 64093.

Please complete the second part of this question to write a tax file memorandum showing the tax consequences and resulting net-cash benefit of filing a claim as opposed to not filing a claim. You do not need to write a letter to Sam. The concern is not about the tax file memorandum formalities, but about the tax rules and their application to these set of facts. Please cite the E-Text reference source pages (attached) for this solution.

550 word minimum, cited APA

On July 24 of the current year, Sam Smith was involved in an accident with his business use automobile. Sam had purchased the car for $30,000. The automobile had a fair market value of $20,000 before the accident and $8,000 immediately after the accident. Sam has taken $20,000 of depreciation on the car. The car is insured for the fair market value of any loss. Because of Sam?s history, he is afraid that if he submits a claim, his policy will be canceled. Therefore, he is considering not filing a claim. Sam believes that the tax loss deduction will help mitigate the loss of the insurance reimbursement. Sam?s current marginal tax rate is 35%. Write a letter to Sam that contains your advice with respect to the tax and cash- flow consequences of filing versus not filing a claim for the insurance reimbursement for the damage to his car. Also prepare a memo for the tax files. Sam?s address is 450 Colonel?s Way, Warrensburg, MO 64093.

Please complete the second part of this question to write a tax file memorandum showing the tax consequences and resulting net-cash benefit of filing a claim as opposed to not filing a claim. You do not need to write a letter to Sam. The concern is not about the tax file memorandum formalities, but about the tax rules and their application to these set of facts. Please cite the E-Text reference source pages (attached) for this solution.

550 word minimum, cited APA