1. The first two assignments require you to compose tax file memoranda.

each of these problems, you will be given a fact pattern or issue that requires you to decide or analyze a particular issue of tax law. You will also be provided with a number of the primary sources discussed above (e.g., Revenue Rulings, cases) on that issue of tax law. You will then compose a tax file memoranda concerning that taxpayer. You can find details as to how to compose such a memorandum in Chapter 2 of your text, including a sample text file memorandum in Figure 2.6 on page 2-26 of your text. Use the materials provided to determine the proper solution to the taxpayer’s issues. In particular, discuss the materials in some detail in the “Analysis” section of the tax file memorandum. THIS IS IMPORTANT! The most important part of any tax file memorandum is the thoroughness of the analysis defending the conclusion reached in the memorandum. Accordingly, most of the points awarded on the assignment are allocated to the “Analysis” section of the memorandum. In assessing these assignments, consideration will be given to, among other factors, (1) your accuracy in summarizing the relevant facts; (2) the accuracy of your identification and statement of the “Issue” presented by the problem; (3) the accuracy of your “Conclusion;” (4) the thoroughness and quality of your analysis

offered in the “Analysis” section of your memorandum; and (5) the overall professionalism of your memorandum (e.g., presentation, use of proper grammar, proper spelling, and quality of communication). EACH OF THE TAX MEMORANDA IS WORTH 30 POINTS, FOR A TOTAL OF 60 POINTS.

2. The remaining assignment requires you to perform some research on the Internet to find relevant materials and to analyze these materials. As previously noted, in performing this research, you may not take advantage of any resources other than those specifically permitted by the assignment, including assignments previously completed by other students or other similar materials. You will then complete an essay answering the question or questions presented by this assignment. Your submission will be graded on a number of factors, including (1) your ability to locate relevant research and materials on the Internet; (2) your ability to analyze these resources; (3) your ability to draw conclusions from these resources and to defend these conclusions with analysis of the research and materials located; and (4) the overall professionalism and content of your essay (e.g., presentation, use of proper grammar, proper spelling, and quality of communication). THIS ESSAY IS WORTH 20 POINTS.

Please note that these assignments are worth a significant portion of your grade. As such, you should take them seriously, and leave yourself enough time to complete them. Do not wait until the last weekend to begin these assignments. If you do, it will be very difficult for you to submit quality responses to each of the four questions or problems posed. Please also note that preparing these answers conscientiously will help you in preparing for the final examination, given that you may be required to perform similar analyses on the exam. Should you have a question, please ask your instructor. Good luck!

WEEK 7 RESEARCH PROJECT

(Set #1)

ACCT 429

Performing tax research is an important part of tax practice. As outlined in Chapter 2 of your textbook, tax law is developed through a number of different governmental entities. Congress enacts the tax Code as statutory law. The Treasury Department is tasked with the implementation of the tax Code and, in the course of doing so, develops a number of documents and materials to aid taxpayers in understanding the Treasury Department’s interpretation of the code, including the Regulations. In turn, the Internal Revenue Service (“IRS”) has the direct responsibility for implementing the tax Code and in assessing and collecting the applicable tax from taxpayers. In the course of its duties, it also develops a number of materials, including Revenue Rulings, Revenue Procedures, and Private Letter Rulings, in which it sets forth its understanding of the tax laws. Finally, the federal courts decide tax cases in which taxpayers contest the government’s interpretation of the tax laws. In deciding these cases, the federal courts set forth binding interpretation of what the tax laws provide. All of these materials (often called primary resources) are important resources in performing tax research. On top of these primary sources of tax law, there are a number of secondary materials provided by various organizations and publishers. These secondary materials offer editorial analysis of the tax laws (somewhat akin to a Cliffs’ Notes® on tax laws) to help tax practitioners understand the tax laws and apply them in given situations.

Just as with the first project that was submitted in Week 3, the following assignment has three (3) different graded elements. Two of them require you to prepare tax file memoranda, while the remaining element requires you to compose an essay answering the question asked. AS SUCH, YOU WILL BE SUBMITTING THREE SEPARATE DOCUMENTS FOR THIS ASSIGNMENT.

The first two assignments require you to compose tax file memoranda. In each of these problems, you will be given a fact pattern or issue that requires you to decide or analyze a particular issue of tax law. You will also be provided with a number of the primary sources discussed above (e.g., Revenue Rulings, cases) on that issue of tax law. You will then compose a tax file memoranda concerning that taxpayer. You can find details as to how to compose such a memorandum in Chapter 2 of your text, including a sample text file memorandum in Figure 2.6 on page 2-26 of your text. Use the materials provided to determine the proper solution to the taxpayer’s issues. In particular, discuss the materials in some detail in the “Analysis” section of the tax file memorandum. THIS IS IMPORTANT! The most important part of any tax file memorandum is the thoroughness of the analysis defending the conclusion reached in the memorandum. Accordingly, most of the points awarded on the assignment are allocated to the “Analysis” section of the memorandum. In assessing these assignments, consideration will be given to, among other factors, (1) your accuracy in summarizing the relevant facts; (2) the accuracy of your identification and statement of the “Issue” presented by the problem; (3) the accuracy of your “Conclusion;” (4) the thoroughness and quality of your analysis

offered in the “Analysis” section of your memorandum; and (5) the overall professionalism of your memorandum (e.g., presentation, use of proper grammar, proper spelling, and quality of communication). EACH OF THE TAX MEMORANDA IS WORTH 30 POINTS, FOR A TOTAL OF 60 POINTS.

The remaining assignment requires you to perform some research on the Internet to find relevant materials and to analyze these materials. As previously noted, in performing this research, you may not take advantage of any resources other than those specifically permitted by the assignment, including assignments previously completed by other students or other similar materials. You will then complete an essay answering the question or questions presented by this assignment. Your submission will be graded on a number of factors, including (1) your ability to locate relevant research and materials on the Internet; (2) your ability to analyze these resources; (3) your ability to draw conclusions from these resources and to defend these conclusions with analysis of the research and materials located; and (4) the overall professionalism and content of your essay (e.g., presentation, use of proper grammar, proper spelling, and quality of communication). THIS ESSAY IS WORTH 20 POINTS.

TAX RESEARCH MEMORANDUM ASSIGNMENT 1

As we learned in Week 4, the Code allows taxpayers to take a deduction for the cost of meals when taxpayers have been deemed to be “away from home” for tax purposes. This determination can be difficult. Two separate clients came to you with questions as to whether they are entitled to take a deduction for the cost of meals incurred during a particular trip. The facts pertaining to each are:

Tracey is a sales representative for a national pharmaceutical company. She has a rather large sales territory, and she makes her rounds to her customers using a company-owned car over a 16- to 19-hour period of time. During these one-day business trips, Tracey will pull over in a suitable location (such as a park or a rest stop) and take a short nap in the backseat of her automobile.

Mark captains a ferryboat. This ferryboat carries tourists on roundtrips from Seattle to Victoria and back, each trip of which lasts from 15 to 17 hours and provides for a

6- to 7-hour layover in Victoria. During the layover, Mark typically takes a four-hour nap on a cot that he has stored in the pilothouse of the ferryboat.

Under each of these circumstances, if the taxpayer entitled to deduct the cost of meals purchased during the trip at issue?

COMPOSE A TAX FILE MEMORANDUM CONCERNING THIS ISSUE FOR BOTH TAXPAYERS USING THESE FACTS AND THE RESEARCH MATERIALS PROVIDED TO YOU IN THE NEXT FEW PAGES (30

POINTS).

Checkpoint Contents

Federal Library

Federal Source Materials

Code, Regulations, Committee Reports & Tax Treaties

Internal Revenue Code

Current Code

Subtitle A Income Taxes §§1-1563

Chapter 1 NORMAL TAXES AND SURTAXES §§1-1400U-3

Subchapter B Computation of Taxable Income §§61-291

Part VI ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS §§161-199

162 Trade or business expenses.

Internal Revenue Code

162 Trade or business expenses.

(a) In general.

There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including—

(1) a reasonable allowance for salaries or other compensation for personal services actually rendered;

(2) traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business; and

(3) rentals or other payments required to be made as a condition to the continued use or possession, for purposes of the trade or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity.

For purposes of the preceding sentence, the place of residence of a Member of Congress (including any Delegate and Resident Commissioner) within the State, congressional district, or possession which he represents in Congress shall be considered his home, but amounts expended by such Members within each taxable year for living expenses shall not be deductible for income tax purposes in excess of $3,000. For purposes of paragraph (2) , the taxpayer shall not be treated as being temporarily away from home during any period of employment if such period exceeds 1 year. The preceding sentence shall not apply to any Federal employee during any period for which such employee is certified by the Attorney General (or the designee thereof) as traveling on behalf of the United States in temporary duty status to investigate or prosecute, or provide support services for the investigation or prosecution of, a Federal crime.

(b) Charitable contributions and gifts excepted.

No deduction shall be allowed under subsection (a) for any contribution or gift which would be allowable as a deduction under section 170 were it not for the percentage limitations, the dollar limitations, or the requirements as to the time of payment, set forth in such section.

(1) Illegal payments to government officials or employees.

No deduction shall be allowed under subsection (a) for any payment made, directly or indirectly, to an official or employee of any government, or of any agency or instrumentality of any government, if the payment constitutes an illegal bribe or kickback or, if the payment is to an official or employee of a foreign government, the payment is unlawful under the Foreign Corrupt Practices Act of 1977. The burden of proof in respect of the issue, for the purposes of this paragraph, as to whether a payment constitutes an illegal bribe or kickback (or is unlawful under the Foreign Corrupt Practices Act of 1977) shall be upon the Secretary to the same extent as he bears the burden of proof under section 7454 (concerning the burden of proof when the issue relates to fraud).

(2) Other illegal payments.

No deduction shall be allowed under subsection (a) for any payment (other than a payment described in paragraph (1) ) made, directly or indirectly, to any person, if the payment constitutes an illegal bribe, illegal kickback, or other illegal payment under any law of the United States, or under any law of a State (but only if such State law is generally enforced), which subjects the payor to a criminal penalty or the loss of license or privilege to engage in a trade or business. For purposes of this paragraph, a kickback

includes a payment in consideration of the referral of a client, patient, or customer. The burden of proof in respect of the issue, for purposes of this paragraph, as to whether a payment constitutes an illegal bribe, illegal kickback, or other illegal payment shall be upon the Secretary to the same extent as he bears the burden of proof under section 7454 (concerning the burden of proof when the issue relates to fraud).

(3) Kickbacks, rebates, and bribes under medicare and medicaid.

No deduction shall be allowed under subsection (a) for any kickback, rebate, or bribe made by any provider of services, supplier, physician, or other person who furnishes items or services for which payment is or may be made under the Social Security Act, or in whole or in part out of Federal funds under a State plan approved under such Act, if such kickback, rebate, or bribe is made in connection with the furnishing of such items or services or the making or receipt of such payments. For purposes of this paragraph, a kickback includes a payment in consideration of the referral of a client, patient, or customer.

(d) Capital contributions to Federal National Mortgage Association.

For purposes of this subtitle, whenever the amount of capital contributions evidenced by a share of stock issued pursuant to section 303(c) of the Federal National Mortgage Association Charter Act ( 12 U.S.C., Sec.

1718 ) exceeds the fair market value of the stock as of the issue date of such stock, the initial holder of the stock shall treat the excess as ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

(e) Denial of deduction for certain lobbying and political expenditures. (1) In general.

No deduction shall be allowed under subsection (a) for any amount paid or incurred in connection with—

(A) influencing legislation,

(B) participation in, or intervention in, any political campaign on behalf of (or in opposition to) any candidate for public office,

(C) any attempt to influence the general public, or segments thereof, with respect to elections, legislative matters, or referendums, or

(D) any direct communication with a covered executive branch official in an attempt to influence the official actions or positions of such official.

(2) Exception for local legislation.

In the case of any legislation of any local council or similar governing body— (A) paragraph (1)(A) shall not apply, and

(B) the deduction allowed by subsection (a) shall include all ordinary and necessary expenses (including, but not limited to, traveling expenses described in subsection (a)(2) and the cost of preparing testimony) paid or incurred during the taxable year in carrying on any trade or business—

(i) in direct connection with appearances before, submission of statements to, or sending communications to the committees, or individual members, of such council or body with respect to legislation or proposed legislation of direct interest to the taxpayer, or

(ii) in direct connection with communication of information between the taxpayer and an organization of which the taxpayer is a member with respect to any such legislation or proposed legislation which is of direct interest to the taxpayer and to such organization,

and that portion of the dues so paid or incurred with respect to any organization of which the taxpayer is a member which is attributable to the expenses of the activities described in clauses (i) and (ii) carried on by such organization.

(3) Application to dues of tax-exempt organizations.

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1. The first two assignments require you to compose tax file memoranda.

1. The first two assignments require you to compose tax file memoranda.

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