ACCT 715 Only

Graduate Case Study - 200 Points

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FEDERAL TAXATION I ACCT 715 GRADUATE CASE STUDY General Description: Tax research is the method used to determine the best available solution to a situation that possesses tax consequences. The tax research process is concerned with finding the possible alternatives to a tax situation and becomes a key in tax planning. This process involves establishing the facts, identifying the issues, locating and evaluating the appropriate authority, developing conclusions and recommendations and communicating the recommendations. Learning Objectives: Distinguish between the statutory, administrative, and judicial sources of the tax law and understand the purpose of each source. Locate and work with the appropriate tax law sources. Have an awareness of tax research tools. Understand the tax research process. Communicate the results of the tax research process in a client letter and a tax file memorandum. Select one of the three Research Problems from the textbook. Chapter 7-Research Problem 1: During 2016, John was the chief executive officer and a shareholder of Maze, Inc. He owned 60% of the outstanding stock of Maze. In 2013, John and Maze, as co- borrowers, obtained a $100,000 loan from the United National Bank. This loan was secured by John's personal residence. Although Maze was listed as a co-borrower, John repaid the loan in full in 2016. On Maze's form 1120 tax returns, no loans from shareholders were reported. Discuss whether John is entitled to a bad debt deduction for the amount of the payment on the loan. (See textbook for additional information for this problem). Chapter 9-Research Problem 1: Aaron, a resident of Minnesota, has been a driver for Green Delivery Service for the past six years. For this purpose, he leases a truck from Green, and his compensation is based on a percentage of the income resulting from his pickup and delivery services. Green allows its drivers to choose their 10-hour shifts and does not exercise any control on how these services are carried out (e.g., the route to be taken or the order in which parcels are delivered or picked up). Under Green's operating agreement with its drivers, Green can terminate the arrangement after 30 days' notice. In practice, however, Green allows its truckers to quit immediately without giving advance notice. The agreement also labels the drivers as independent contractors. Green maintains no health or retirement plans for its drivers, and each year it reports their income by issuing Forms 1099-MISC (and not Forms W-2). Green requires its drivers to maintain a commercial driver's license and be in good standing with the state highway law enforcement division. Citing the employment tax regulations in Sections 31.3121(d)-1(c)(2) and 31.3306(i)- 1(b), an IRS agent contends that Aaron is an independent contractor and, therefore, is subject to the selfemployment tax. Based on Peno Trucking, Inc. (93 TCM 1027, T.C. Memo. 2007-66), Aaron disagrees and contends that he is an employee (i.e. not self- employed). Who is correct and why? (See textbook for additional information for this problem). DBH - REV. 8/2016 1 Chapter 10- Research Problem 2: Ken and Mary Jane Blough, your neighbors, have asked you for advice after receiving correspondence in the mail from the IRS. You learn that the IRS is asking for documentation in support of the itemized deductions of the Bloughs claimed on a recent tax return. The Bloughs tell you that their income in the year of question was $75,000. Because their record keeping habits are poor, they felt justified in claiming itemized deductions equal to the amounts that represent the average claimed by other taxpayers in their income bracket. These averages are calculated and reported by the IRS annually based on actual returns filed in an earlier year. Accordingly, they claim medical expenses of $7,102, taxes of $6,050, interest of $10,659, and charitable contributions of $2,693. What advice do you give the Bloughs? (See textbook for additional information for this problem). Specific Requirements: Students are required to research the issue and communicate findings in (1) a tax file memorandum and (2) a letter to the client. Examples can be found Chapter 2 of the textbook. The memorandum and letter should cite your resources and/or references. A minimum of four references should be used. (e.g., Internal Revenue Code or Regulations, or court cases). The memorandum and letter should be at least one full page each and not exceed three pages each. Chapter 2 discusses various tax research. You are encouraged to use Checkpoint Student Edition to help you in your research. DBH - REV. 8/2016 2 Objectives REFERENCES & QUALITY OF RESEARCH 1. At least 4 references, textbook may be included in this total. 2. Appropriate source information is used to support the opinion. The source information is integrated into the writing. Low Performance 0 points No references used or listed. CONTENT & DEVELOPMENT 1. Consideration of all taxation aspects of topic 2. Pro and Con decisions 3. Must be current tax law. 4. Include all pertinent issues Information is on topic CORRECT GRAMMAR , SPELLING AND FORMAT: 1. Tax Memo Issue identification Explanation of code sections Explanation of regulations Analysis is complete and appropriate Format 20 points 1. Does not discuss the pros and cons 2. Is not on topic Does not consider legal aspects of topic. 10 points Does not check for spelling and grammar errors. Hard to understand the paper. Average 25 points 1-2 references, one is the textbook. No websites from IRS tax court cases, T.C. memos or regulations are used. Weak use of source information and is not integrated well into the writing. 60 points 1. Discusses pros and cons Uses pertinent cases 25 points A few grammatical or spelling errors, but overall very readable. The tax memo and client letter meet most of the listed criteria. Exemplary Performance 50 points 4 or more sources effectively used to analyze issue. Earned Points Appropriate source information is used to support opinion and excellent integration into writing. 100 points 1. Discusses all sides of the issue thoroughly 2. Pertinent, current law cases are included. Provides the client with a conclusive answer to the issue. 50 points No errors in spelling or grammar and reads very well. The paper is coherent and clear with excellent use of business language appropriate for the client. Both the memo and the letter meet the proper format and all listed criteria. 2. Client letter Clarity Business language appropriate for client. Format Ties to memo DBH - REV. 8/2016 3