I have reviewed the tax returns of Efran Zimbalist, who is a CEO of a small comp[any called the Infranet Inc. Apart from being a CEO he has an accommodation that is given by the company and he has a small collection of cars in his house garage. His friend wanted to start a partnership with him in selling the cars. Efran used the money earned from selling the cars as a donation and gave all the money in donations to the University of St Thomas. Her wife was studying 'motivational psychology' in the same University.
The tax issues concerned Efran Zimbalist is that the house they have been provided is rented or not and the cars that are collected by be Efran are kept in the garage which is constructed from money provided by the company. The garage is used for personal purposes or for privately earning money by selling the cars. The property provided by the company is used personally or private; if it is being used private then investigation needs to be done on the payment of taxes by Efran.
THE IFRANET PROPERTY: RESIDENCE OR BUSINESS ENTERPRISE
The different uses of the property will define either the property or the assets in the property are used for personal reasons or to earn a living. It needs to be decided that what is the scenario in which the property has been converted from a residence into a private or a business enterprise? The tax is determined after finding out the circumstances under which the property has been converted into a source of income. According to the Tax Rules there are no strict laws for the tax payers to pay the tax after converting his or her residence into a commercial activity place. There are different factors that are taken into consideration while it is determine whether a property is used for personal purposes or it is used for commercial reasons. The property of Efrant needs to be analyzed under different factors in order to make it clear that all the tax returns are paid properly. These factors are:
Purpose or Intent of the Owner- The residence provided by the company is used by Efrant for not only living with his family but the property is also used as a business conducting place where Efrant has invested 40% of his money to attract the clients and make business agreements. The amount invested by Efrant is taxable because he has invested his income in earning profits for the business, therefore income on earning will be taxable. Although the intentions of the owner of the house are not completely to earn profit but according to the tax rules the conversion of the property has taken place.
Diligent efforts to rent the property- There are no efforts made by the owner of the residence to covert his residence into a business enterprise. The rules of tax are that if a property is owned ...