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[ Corporate Tax - Intermediate Sanctions Excise Taxes ]

Case Study #3 - Unreported taxable fringe benefits<
Intermediate Sanctions :|: Case Studies of Potential Excess Benefit Transactions

Bill Bucs is the dean of the business school at Premier University, a major Ivy League university. The business school is a major source of revenue for Premier University and consequently represents a substantial portion of Premierís income. Bill does not serve on Premierís governing board or as an officer. Bill receives a salary and retirement benefits fixed by a three-year renewable employment contract. As dean, Bill manages the business school and has authority to allocate the budget for the school.

Bill has been asked to present an important paper on research he has been conducting. The presentation will be made at a prestigious two-day annual conference of educators in Paris. Bill is very excited about the opportunity to present his findings as well as have the opportunity to spend some time in Paris where he has not been for a number of years. Bill has invited his wife, Susan, a fashion consultant for a major department store, to accompany him on the trip since many of the educators that attend bring their spouses. Besides, Susan is not about to let Bill spend ten days in Paris without her.

Bill asked his assistant to book flights for him and his wife. He requested first class airfare after he learned that another educator presenting a paper at the conference was on the same flight in first class and Bill wanted the chance to compare notes with this other presenter on the flight over. Bill instructed his assistant to prepay the entire estimated Paris hotel bill as well as the airline tickets and to run it through accounts payable, reflecting his approval, as a publicity expense. That would help Bill avoid exceeding any limit on his credit card while in Paris. Regardless, Bill knows that Premier University will receive a substantial amount of publicity from his presentation. Bill also knows that Susanís presence will more than justify her expenses because of her great abilities in social settings to help promote both her husband and the university. Bill also approved the payment of a $650 conference registration fee for Susan for meals, the awards banquet and an all day tour for spouses of Paris and the French countryside. The cost of the first class airfare is $6,000 per person. The hotel is $350 per night and Bill and Susan will be staying for ten nights. Bill feels that the additional time in Paris will allow him the opportunity to start preparing a new strategic plan for the business school. When Bill is in his office, he finds little time for ďstrategic thinkingĒ because of his hectic schedule. Bill convinced Morris Pennypacker, provost of Premier, to sign the check requests for the payments to avoid any questions of a conflict of interest by Bill.

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