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PROBLEM: On January 1, 2020, Bob Hod acquired a new principal residence in Las Vegas for $660,000 after relocating from Hawaii. To fund this purchase, he secured two bank loans, both featuring an initial interest-free period for the first yvear, followed by a 5% simple interest rate for the remaining 9 years. The loans, totaling $600,000, were collateralized by a mortgage on the newly acquired property3$400,000 from First Bank as the primary mortgage and $200,000 from his Hawai1 bank as the secondary mortgage. Notably, the primary loan was a recourse loan, while the secondary loan, based on broader family connections with the Hawaii bank, was structured as a non-recourse loan. Both loans stipulated that payments should first be allocated towards interest, with any remainming amount applied to the principal balance. However, a significant turn of events occurred on January 1, 2022, when Mr. Hod lost his marketing job due to the impact of artificial intelligence (AI). Consequently, he ceased making payments on both loans. At the foreclosure sale on Jan. 1, 2023, the Hawaii Bank was the highest bidder for the house at $300,000. \"No Internal Revenue Service (IRS) Form 1098, Mortgage Interest Statement, was issued to Mr. Hod from either bank for tax year 2023 for the home mortgage interest. Mr. Hod claimed a $50,000 mortgage interest deduction for 2023, despite the lack of Form 1098. The IRS disallowed the entire interest deduction. The IRS agent believed that since the $300,000 foreclosure bid \"did not cover the principal balance due from petitioners to the Hawaii Bank, after payment of the first mortgage balance due to no interest amount paid to either Bank at the time of the foreciosure sale.\" On.Jan. 1, 2024, the Hawaii Bank sold the house to an unrelated third party for $500,000. The IRS also alleged civil fraud by Mr. Hod. A decade earlier Mr. Hod had lied to the IRS Revenue Agent conducting a civil examination of his 2014 through 2016 tax returns and to an IRS Special Agent conducting a criminal mvestigation mto his 2014 through 2018 tax returns. As a result of that criminal investigation, Mr. Hod was convicted of tax perjury and was sentenced to a 30-month prison term. In January 2024 at an IRS administrative appeal Mr. Hod represented himself pro se (without a lawyer). Mr. Hod contested the frand determination and testified that he was clueless and unsophisticated regarding tax matters. INSTRUCTIONS: Mr. Hod is vour client. Write a tax research memo identifying the three most important sophisticated tax issues for vour client. one of which relates to a penaltv. (To ensure you address the three most important issues yvou may identify a maximum of five issues). Each issue must include relevant critical facts and precisely where in the code each issue arises. Use the following subheadings which are expected in a tax research memo. Use the following order: Facts, Issues, Conclusions, List of Applicable Law, Discussion of Law, and Application. Do not create any other subheadings in the formal memo. Review both the memo example and the grading rubric for the Memo to help maximize your points