Case 2 Mini-case: Mr. Smith is an accrual basis taxpayer with multiple lines of businesses. One business is a gas station. The land underneath the gas station did not appear contaminated when Mr. Smith purchased it. However, the land now has potential soil and groundwater problems (environmental liabilities). Mr. Smith engaged in a section 351 tax free exchange transferring the gas station to a new subsidiary XYZ in exchange for the stock of XYZ and the assumption of the environmental liabilities. Before the transfer, Mr. Smith did not take any environmental remediation efforts to clean up the lands soil and groundwater problems. How is the basis of Mr. Smiths land determined?

The purpose of this assignment is for the student to gain experience, 1) conducting tax research, and 2) communicating a recommendation effectively using a tax research memo. The assignment includes one mini-case regarding a fictitious tax-related scenario. Read the scenario carefully, and then begin researching your recommendation, using authoritative and non-authoritative sources.

Begin your research with the official Internal Revenue Code:http://uscode.house.gov/browse/prelim@title26&edition=prelim What you will be turning in: You will be turning in a tax research memo. Include the following section titles (in order); bold, and starting at the left side of the page. Relevant Facts Tax Issue Conclusion Support Actions to be Taken Use the following rules: double-space, 1 margins, Times New Roman font size 12. Write clearly and concisely so that the tax memo is no more than two or three pages (not including the reference section). You must use in-text citations throughout your paper, and provide a reference list at the end of your work. Follow APA rules for in-text citations (see eCollege) and references. Try to minimize your use of directly quoted material. Much of your writing should be your own analysis, explanation, and recommendation of what you found in your research. Clearly state any assumptions that you might make.\

Format:

Relevant Facts

Tax Issue

Conclusion

Support

Actions to be Taken