in this problem: Gray Chemical Company manufactured pesticidesthat were toxic. Over the course of several years, the toxic wastecontaminated the air and water around the company’s plant. Severalemployees suffered toxic poisoning, and the EnvironmentalProtection Agency cited the company for violations. In court, thejudge found Gray guilty and imposed fines of $15 million. Thecompany voluntarily set up a charitable fund for the purpose ofbettering the environment and funded it with $8 million. Thecompany incurred legal expenses in setting up the foundation anddefending itself in court. The court reduced the fine from $15million to $7 million. Gray Chemical Company deducted the $8million paid to the foundation and the 1 legal expenses incurred.The IRS disallowed both deductions on the grounds that the paymentwas, in fact, a fine and in violation of public policy. Gray’spresident, Ted Jones, has contacted you regarding the deductibilityof the $7 million fine, the $8 million payment to the foundation,and the legal fees. Write a letter to Mr. Jones that contains youradvice and prepare a memo for the tax file. Gray’s address is 200Lincoln Center, Omaha, NE 68182. Research aids: IRC §162(a) and(f). Treas. Reg. § 1.162-21(b).the results to the scenario are:1.)the fine of $7million is not deductable as its a fine andpenalty which is imposed for breaking the law.2.)$8 million payment to the foundation is also not allowed as adeduction as its in the nature of fine only. had the company notset up a charitable fund for the purpose of bettering theenvironment and funded it with $8 million the fine would have been$15 million. the reduction in fine from 15 million to 7 million wasonly beacuse it had agreed to set up a fund and make ammends forthe violations it made. hence the $8 million is also in the natureof fine and penalty and thus not deductible3.)legal expense is the only expense out of thegiven three whichwill be allowed as per IRC §162(a) point 3.MY PROBLEM:I am required to be the client (ted jones) in thisscenario and ask 4 questions regarding theseresults….1.) what are 4 good tax related questions that I ( tedJones) can ask the researcher (tax person who found thisinformation) after he has told me this information?
(it’s simple and quick)