Audit Letter to IRS

Response to IRS audit letter Name: Institution: Date: There is no prescribed valuation of foreign currency exchange rate by the IRS, but valuation method used has been applied consistently in line with the requirements of the IRS. Thus, the valuation used the prevailing market rates in translating the currencies. For instance those transactions appearing once were translated using the prevailing rate of the day and those taking place throughout the year occurred through an average currency exchange rate (Hoffman et al., 2010). In addition, the taxation of the foreign income takes into account the time of income realization. Thus, it is prudent to look into the aforementioned issues in the IRS audit report to avoid paying penalties on my part and clarify on taxation matters affecting foreign business operations. Taxation of increase in income is a long -held principle with the taxing of an asset appreciation a follow- up to this principle. Nonetheless, the taxing of an appreciated asset following international exchange also follows the realization requirement (Johnson et al., 2008). At the same time, this constituted mere transfer rather than sales. The IRS states that sale of appreciated property attracts capital gains tax, but the same is not true of transfer. At the same time, having complied with all the rules disposal of the assets would not attract further charges as alleged by the IRS audit. Furthermore, there was no intention of asking for a tax deferral through relinquishing and replacement of property, which all require trading at the fair value. In response to the audit report that there was under reporting of income and understatement of revenue, there was no intent to defraud the IRS. In other words, my contention is that the figures used in auditing sales and revenues did not match with the actual figures. During the period under review, there was dep...