Assignment 2 Tax Research Memo REQUIREMENT Each student must individually complete a tax research project memo. Students should choose one of the three topics below. The memo should be typed and in the format provided below (labeled Appendix A-6). Students should use RIA Checkpoint, available through the PSU library to conduct the research. It will be graded on accurately and insightfully analyzing the given facts with proper tax law and citation, as well as presentation (clarity and conciseness of the writing). See the grading rubric below for additional details. Note that only primary sources should be cited. Primary sources include the Internal Revenue Code (IRC), Revenue Rulings, and court cases, but do not include anything from the IRS. The Appendix posted on D2L provides greater details. The research memo must be submitted on to the dropbox on D2L in PDF form prior to the due date. Outside of extenuating circumstances, late projects will have 5% deducted from the grade for each day beyond the due date, up to a maximum of 20% deduction. Projects will not be accepted more than 2 weeks after the due date, at which point solutions will be posted. Choose one of the three topics below: Topic 1 Samuel recently graduated from Portland State University with an Accounting degree. He is currently working as an accountant for a large consulting company and wants to know how to account for the following items. The company paid for a CPA prep course, which would have cost him $3,000. They also paid for all of the CPA exam and state filing fees, which totaled $900. The bank where he got his student loans also forgave half of his $40,000 of student loans, which brought his current year balance down to $20,000. His AGI before considering any of these items was $62,000. Using the tax law, determine how these items will affect his taxes. Topic 2 Morgan graduated from PSU with an accounting degree and has recently started working for a large public accounting firm. She receives a salary of $50,000. She is working in auditing and finds out that her primary client is located in Seattle, so she will spend almost half of her time in Seattle. She therefore decides to rent out her condo on Airbnb during the time she in Seattle and wants to know what the tax implications will be. She will receive $150 per night from Airbnb when it is rented. She will also hire a cleaning company that will come after each guest. Some other expenses will include keeping supplies stocked (toilet paper, coffee, etc.), buying some additional supplies, such as a smart key lock, new sheets, a new coffee maker, and blackout curtains, some additional maintenance that will be required due to having extra people in her place (painting touch ups, special carpet cleaning, etc.), and there is also depreciation of her condo and furnishings. She pays a mortgage on the condo, as well as a monthly HOA fee, and annual property taxes. Using the tax law, determine how these items will affect her taxes. Topic 3 Julia is a PSU student who has just decided to start driving for LYFT to make money to pay her tuition. To help her out, her grandmother gave Julia her old car to use, which has a value of $10,500. She had to get some work done on the car before it was ready to use for a cost of $1,000. She estimates that she will use it for her LYFT business about 90% of the time and for personal reasons 10% of the time. Julia estimates that she will make $10,000 from driving, and will incur costs in addition to the $1,000 in repairs that she already incurred for gas, oil changes, new tires, as well 'wear and tear' on the car. Using tax law, determine how these items will affect her taxes. 1 Grading Rubric Exceeds Expectations Meets Expectations Does Not Meet Expectations 2 Clearly and concisely identifies the Identify Facts and relevant facts and issues from the facts Issues provided. 1 Identifies most of the relevant facts and issues from the facts provided. 0 Does not Clearly identify the relevant facts and issues from the facts provided. Demonstrates a thorough and creative Demonstrates adequate consideration of Does not demonstrate appropriate Context, Purpose, understanding of context, purpose, and context, purpose, and audience. attention to context, purpose, or the and Audience audience. intended audience. Thoroughly identifies high-quality, Identifies relevant sources of tax law that Does not identify relevant sources of tax credible, and relevant sources of tax law apply to the facts provided and law that apply to the facts provided and Identify and Use that apply to the facts provided and demonstrates a consistent use and appropriately or effectively use them Relevant Sources demonstrates a skillful and thorough use understanding of the sources to support to support the communication. Sources of Tax Law of the sources to enhance the the communication. Sources are may not be cited correctly communication. Sources are correctly generally cited correctly. cited. Correctly and concisely analyzes how the Adequately analyzes how the relevant Does not adequately analyze how the Analysis relevant sections of law apply to the facts sections of law apply to the facts relevant sections of law apply to the facts rovided provided. provided. Thoroughly and accurately summarizes Adequately summarizes how the relevant Does not adequately analyze how the Propose Reasoned how the relevant laws apply to the facts laws apply to the facts provided and relevant laws apply to the facts provided Solution provided and explains the outcome as it explains the outcome as it relates to the and explains the outcome as it relates to relates to the tax treatment. tax treatment. the tax treatment Message is skillfully delivered with a Message is delivered in a clear and Does not present the message in a clear clear, concise and persuasive authority. concise manner. Demonstrates consistent or appropriate manner. May contain Manner of Very professional and free of use of professional communication grammatical and typographical errors. Presentation grammatical and typographical errors. conventions. Generally free of grammatical and typographical errors. A central message is summarized in a A central message is summarized in a Conclusion may not provide a central high quality conclusion that provides a quality conclusion that provides a message is summarized in a quality Summarize and recommendation. The message is clearly recommendation. The message is well conclusion that provides a Conclude and concisely written, and provides a written, and provides a logical summary recommendation. The message may not Information logical summary based on the laws. based on the laws, analysis, and proposed be clear or concise, and may not provide analysis, and proposed solution. solution a logical summary based on the laws, analysis , and proposed solution. TOTAL SCORE 2 A-6 Comprehensive Appendix A Memorandum-to-the-File Date December 9, 20X 1 From: Rosina Havacek Re: The taxability of meal watchers furnished by Mercy Hospital to its medical staff. Facts [State only the facts that are relevant to the Issue(s) and necessary for the Analysis.] Our client, Mercy Hospital ("Mercy"), provides meal vouchers to its medical employees to enable them to retain on emergency call. The vouchers are redeemable at Mercy's onsite cafeteria and at MacDougals, a privately owned sandwich shop, MacDougal's cents business space from the hospital. Although Mercy does not require its employees to remain on or near its premises during their meal hours, the employees generally do. Elizabeth Fegali, Mercy's Chief Administrator, has asked us to research whether the value of the meal vouchers is taxable to the employees. Issues [Identify the issue) raised by the facts. Be specific.] The taxability of the meal vouchers depends on the issues: first, whether the meals are furnished for the convenience of the employer"; second, whether they are furnished on the business premises of the employer"; and third, whether the vouchers are cquivalent to cash. Applicable law Discus bose legal principles that both strengthens and weaken the client's case. Because the primary authority for tax law is the SRC. begins with the IRC Section 119 provides that the value of meals is excludible from an employee's income if the weak are furnished for the convenience of, and on the business premises of the employer. [Discuss how administrative and/or judicial authorities expound on statutorytermes. Under Reg. Sec. 1.119-i, a meal is furnished for the convenience of the employer" if it is furnished for a substantial noncompensatory business reason." A substantial encompensatory business reason" includes the need to have the employee available for emergency calls during his or her meal period. Under Sec. 119(b)(4), if more than half the employecs satisfy the "for the convenience of the employer" test, all employees will be regarded as satisfying the test. Regulation Soc. 1.119.1 din business premises of the employer as the place of employment of the employee [When discussing court cases, present case facts in such a way as to enable the reader to draw an analogy with dient facta. A Supreme Court case, Kowalsku CIR, 434 U.S. 77, 77-2 USTC 49748, discusses what constitutes"Ricals" for purposes of Sec. 119. In Kowski, the State of New Jersey furnished cashmeal allowances to its state troopers to enable them to mat while on duty. It did not require the troopers to use the allowances exclusively for meals. Nor did it require them to consume their moals on its business premises. One trooper, R.J. Kowalski, luded the value of hie allowances from his income, The IRS disited this treatment, and Kowalski trak the IRS to Court. In Court, Kowalski argued that the allowances were excludible because they were furnished for the convenience of the employed." The IRS contended that the allowances were taxable because they amounted to compensation. The U.S. Supreme Court took up the case and decided for the IRS, The Court held that the Sec. 119 income exlusion does not apply to payments in cash. Analysis [The analysis should (a) apply applicable law to the facts and (b) address the issues). In this section, every proposition should be sup ported by either authority, logic, or peesible assumptions.] Issue 1: The meals provided by Mercy seem to be furnished "for the convenience of the staployer." They are furnished to have employees available for emergency call during their meal breaks. This is a substantial oncompensatory reason within the meaning of Reg Sec. 1.119.1. Issue 2: Although the hospital cafeteria appears to be the business premises of the employee" MacDougal's does not appear to be. The hospital is the place of employment of the medical employees. MacDougal's is not Issuer 3: [In applying case low to the facts, indicate how case facts are similar to dissimilar from client facts. If the analysis does not sup port a "y-to do not glue one.) Based on the foregoing authorities, it is unclear whether the vouchers are equivalent to cash On the one hand, they are redeemable only in meals. Thus, they resemble meals-in-kind. On the other hand, they are redeemable at more than one institution. Thus, they reseable cash. Nor is it clear whether a court deciding this case would reach the same conclusion as the Supreme Court did in Kowalski. In the latter case, the State of New Jersey provided its meal allowances in the form of cash. It did not require its employees to use the allowances exclusively for meals. Nor did it require them to consume their meals on its business premises. In our case, Mercy provides its seal allowances in the form of vouchers. Thus, it indirectly requires its employees to use the allowances exclusively for meals. On the other hand, it does not require them to consume their meals on its business promises. Conclusion [The conclusion slowd (a) logically flow from the analysis, and (b) address the issues). Although it appears that the meals acquired by voucher in the hospital cafeteria are furnished for the convenience of the employer" and on the business premises of the employer," it is unclear whether the vouchers are equivalent to cast. If they are equivalent to cash, or if they are redeemed at MacDougal's, their value is likely to be taxable to the employees. On the other hand, if they are not cruivalent to cash, and they are redeemed only in the hospital cafeteria, their value is likely to be excludible. 3 Assignment 2 Tax Research Memo REQUIREMENT Each student must individually complete a tax research project memo. Students should choose one of the three topics below. The memo should be typed and in the format provided below (labeled Appendix A-6). Students should use RIA Checkpoint, available through the PSU library to conduct the research. It will be graded on accurately and insightfully analyzing the given facts with proper tax law and citation, as well as presentation (clarity and conciseness of the writing). See the grading rubric below for additional details. Note that only primary sources should be cited. Primary sources include the Internal Revenue Code (IRC), Revenue Rulings, and court cases, but do not include anything from the IRS. The Appendix posted on D2L provides greater details. The research memo must be submitted on to the dropbox on D2L in PDF form prior to the due date. Outside of extenuating circumstances, late projects will have 5% deducted from the grade for each day beyond the due date, up to a maximum of 20% deduction. Projects will not be accepted more than 2 weeks after the due date, at which point solutions will be posted. Choose one of the three topics below: Topic 1 Samuel recently graduated from Portland State University with an Accounting degree. He is currently working as an accountant for a large consulting company and wants to know how to account for the following items. The company paid for a CPA prep course, which would have cost him $3,000. They also paid for all of the CPA exam and state filing fees, which totaled $900. The bank where he got his student loans also forgave half of his $40,000 of student loans, which brought his current year balance down to $20,000. His AGI before considering any of these items was $62,000. Using the tax law, determine how these items will affect his taxes. Topic 2 Morgan graduated from PSU with an accounting degree and has recently started working for a large public accounting firm. She receives a salary of $50,000. She is working in auditing and finds out that her primary client is located in Seattle, so she will spend almost half of her time in Seattle. She therefore decides to rent out her condo on Airbnb during the time she in Seattle and wants to know what the tax implications will be. She will receive $150 per night from Airbnb when it is rented. She will also hire a cleaning company that will come after each guest. Some other expenses will include keeping supplies stocked (toilet paper, coffee, etc.), buying some additional supplies, such as a smart key lock, new sheets, a new coffee maker, and blackout curtains, some additional maintenance that will be required due to having extra people in her place (painting touch ups, special carpet cleaning, etc.), and there is also depreciation of her condo and furnishings. She pays a mortgage on the condo, as well as a monthly HOA fee, and annual property taxes. Using the tax law, determine how these items will affect her taxes. Topic 3 Julia is a PSU student who has just decided to start driving for LYFT to make money to pay her tuition. To help her out, her grandmother gave Julia her old car to use, which has a value of $10,500. She had to get some work done on the car before it was ready to use for a cost of $1,000. She estimates that she will use it for her LYFT business about 90% of the time and for personal reasons 10% of the time. Julia estimates that she will make $10,000 from driving, and will incur costs in addition to the $1,000 in repairs that she already incurred for gas, oil changes, new tires, as well 'wear and tear' on the car. Using tax law, determine how these items will affect her taxes. 1 Grading Rubric Exceeds Expectations Meets Expectations Does Not Meet Expectations 2 Clearly and concisely identifies the Identify Facts and relevant facts and issues from the facts Issues provided. 1 Identifies most of the relevant facts and issues from the facts provided. 0 Does not Clearly identify the relevant facts and issues from the facts provided. Demonstrates a thorough and creative Demonstrates adequate consideration of Does not demonstrate appropriate Context, Purpose, understanding of context, purpose, and context, purpose, and audience. attention to context, purpose, or the and Audience audience. intended audience. Thoroughly identifies high-quality, Identifies relevant sources of tax law that Does not identify relevant sources of tax credible, and relevant sources of tax law apply to the facts provided and law that apply to the facts provided and Identify and Use that apply to the facts provided and demonstrates a consistent use and appropriately or effectively use them Relevant Sources demonstrates a skillful and thorough use understanding of the sources to support to support the communication. Sources of Tax Law of the sources to enhance the the communication. Sources are may not be cited correctly communication. Sources are correctly generally cited correctly. cited. Correctly and concisely analyzes how the Adequately analyzes how the relevant Does not adequately analyze how the Analysis relevant sections of law apply to the facts sections of law apply to the facts relevant sections of law apply to the facts rovided provided. provided. Thoroughly and accurately summarizes Adequately summarizes how the relevant Does not adequately analyze how the Propose Reasoned how the relevant laws apply to the facts laws apply to the facts provided and relevant laws apply to the facts provided Solution provided and explains the outcome as it explains the outcome as it relates to the and explains the outcome as it relates to relates to the tax treatment. tax treatment. the tax treatment Message is skillfully delivered with a Message is delivered in a clear and Does not present the message in a clear clear, concise and persuasive authority. concise manner. Demonstrates consistent or appropriate manner. May contain Manner of Very professional and free of use of professional communication grammatical and typographical errors. Presentation grammatical and typographical errors. conventions. Generally free of grammatical and typographical errors. A central message is summarized in a A central message is summarized in a Conclusion may not provide a central high quality conclusion that provides a quality conclusion that provides a message is summarized in a quality Summarize and recommendation. The message is clearly recommendation. The message is well conclusion that provides a Conclude and concisely written, and provides a written, and provides a logical summary recommendation. The message may not Information logical summary based on the laws. based on the laws, analysis, and proposed be clear or concise, and may not provide analysis, and proposed solution. solution a logical summary based on the laws, analysis , and proposed solution. TOTAL SCORE 2 A-6 Comprehensive Appendix A Memorandum-to-the-File Date December 9, 20X 1 From: Rosina Havacek Re: The taxability of meal watchers furnished by Mercy Hospital to its medical staff. Facts [State only the facts that are relevant to the Issue(s) and necessary for the Analysis.] Our client, Mercy Hospital ("Mercy"), provides meal vouchers to its medical employees to enable them to retain on emergency call. The vouchers are redeemable at Mercy's onsite cafeteria and at MacDougals, a privately owned sandwich shop, MacDougal's cents business space from the hospital. Although Mercy does not require its employees to remain on or near its premises during their meal hours, the employees generally do. Elizabeth Fegali, Mercy's Chief Administrator, has asked us to research whether the value of the meal vouchers is taxable to the employees. Issues [Identify the issue) raised by the facts. Be specific.] The taxability of the meal vouchers depends on the issues: first, whether the meals are furnished for the convenience of the employer"; second, whether they are furnished on the business premises of the employer"; and third, whether the vouchers are cquivalent to cash. Applicable law Discus bose legal principles that both strengthens and weaken the client's case. Because the primary authority for tax law is the SRC. begins with the IRC Section 119 provides that the value of meals is excludible from an employee's income if the weak are furnished for the convenience of, and on the business premises of the employer. [Discuss how administrative and/or judicial authorities expound on statutorytermes. Under Reg. Sec. 1.119-i, a meal is furnished for the convenience of the employer" if it is furnished for a substantial noncompensatory business reason." A substantial encompensatory business reason" includes the need to have the employee available for emergency calls during his or her meal period. Under Sec. 119(b)(4), if more than half the employecs satisfy the "for the convenience of the employer" test, all employees will be regarded as satisfying the test. Regulation Soc. 1.119.1 din business premises of the employer as the place of employment of the employee [When discussing court cases, present case facts in such a way as to enable the reader to draw an analogy with dient facta. A Supreme Court case, Kowalsku CIR, 434 U.S. 77, 77-2 USTC 49748, discusses what constitutes"Ricals" for purposes of Sec. 119. In Kowski, the State of New Jersey furnished cashmeal allowances to its state troopers to enable them to mat while on duty. It did not require the troopers to use the allowances exclusively for meals. Nor did it require them to consume their moals on its business premises. One trooper, R.J. Kowalski, luded the value of hie allowances from his income, The IRS disited this treatment, and Kowalski trak the IRS to Court. In Court, Kowalski argued that the allowances were excludible because they were furnished for the convenience of the employed." The IRS contended that the allowances were taxable because they amounted to compensation. The U.S. Supreme Court took up the case and decided for the IRS, The Court held that the Sec. 119 income exlusion does not apply to payments in cash. Analysis [The analysis should (a) apply applicable law to the facts and (b) address the issues). In this section, every proposition should be sup ported by either authority, logic, or peesible assumptions.] Issue 1: The meals provided by Mercy seem to be furnished "for the convenience of the staployer." They are furnished to have employees available for emergency call during their meal breaks. This is a substantial oncompensatory reason within the meaning of Reg Sec. 1.119.1. Issue 2: Although the hospital cafeteria appears to be the business premises of the employee" MacDougal's does not appear to be. The hospital is the place of employment of the medical employees. MacDougal's is not Issuer 3: [In applying case low to the facts, indicate how case facts are similar to dissimilar from client facts. If the analysis does not sup port a "y-to do not glue one.) Based on the foregoing authorities, it is unclear whether the vouchers are equivalent to cash On the one hand, they are redeemable only in meals. Thus, they resemble meals-in-kind. On the other hand, they are redeemable at more than one institution. Thus, they reseable cash. Nor is it clear whether a court deciding this case would reach the same conclusion as the Supreme Court did in Kowalski. In the latter case, the State of New Jersey provided its meal allowances in the form of cash. It did not require its employees to use the allowances exclusively for meals. Nor did it require them to consume their meals on its business premises. In our case, Mercy provides its seal allowances in the form of vouchers. Thus, it indirectly requires its employees to use the allowances exclusively for meals. On the other hand, it does not require them to consume their meals on its business promises. Conclusion [The conclusion slowd (a) logically flow from the analysis, and (b) address the issues). Although it appears that the meals acquired by voucher in the hospital cafeteria are furnished for the convenience of the employer" and on the business premises of the employer," it is unclear whether the vouchers are equivalent to cast. If they are equivalent to cash, or if they are redeemed at MacDougal's, their value is likely to be taxable to the employees. On the other hand, if they are not cruivalent to cash, and they are redeemed only in the hospital cafeteria, their value is likely to be excludible. 3