I. Instructions.

Prepare the tax advice requested as though you are the taxpayer$$s advisor at Frank Fixer$$s firm.

Answer the questions presented and submit: $($a$)$ your examination and $($b$)$ your outline on CANVAS in

PDF only, saved as ONE file, with the following filename: $$LAST FIRST FINAL & OUTLINE $571.$

NOTE: Failure to follow these instructions or submit as instructed, will result in loss of point value, no

credit or both $$ no exceptions. Use the templates provided to complete this examination.

II$.$ Tax File Facts.

Larry $$Sneakerhead$$ Taxpayer $($Larry$)$ is a highly successful retailer of resale t$-$shirts and

sneakers. He sells sneakers and clothing in the resale retail market to celebrities and various collectors.

He is a $33\mathrm{.}33\%$ member of Sneakerheads and Cool Dudes, LLC $($LLC$).$ Larry, along with his partners,

opened resale stores in Los Angeles, Chicago, New York, and Miami, which resold sneakers and vintage

t$-$shirts to other sneakerheads and collectors in the Gen$-$Z retail markets. In a baffling but not unfamiliar

practice, Larry$$s bookkeepers decided that not paying sales taxes in the states in which they did business

was simply $$money in Larry$$s pocket,$$ when in fact the sales taxes were due and payable. Instead, sales

taxes went unpaid, materially skewing the books of the business. When the bookkeepers were asked why

they did this, their response, albeit incorrect, was, $$bro chill...we can negotiate discounts and payment

plans later.$$ Almost a million dollars of state sales taxes payable by the LLC went unremitted between

$2020$ and $2023($Tax Years at Issue$).$

Next, Larry$$s tax CPA, Mary Malpractice, without properly investigating and reconciling Larry$$s

Quickbooks, incorrectly concluded that the money in the bank from unpaid sales taxes unremitted was

revenue and reported as $$income$$ to Larry and his members from sales.

Mary incorrectly and negligently misreported this on the LLC$$s $2020-2023$ Forms $1065$ and each

member$$s requisite Schedule K$-1.$ She ultimately misreported the misstated income on each member$$s

Form $1040$ for the Tax Years at Issue. Mary also forgot to inform Larry and his partners about the

perceived revenue from the failure to remit sales taxes. Mary also failed to mention that taxes were due

on this incorrectly reported income. Soon enough, each of the LLC$$s members started receiving notices

from the IRS that each member owes hundreds of thousands of dollars in federal taxes due and owed.

By this time, Larry was $$fed$$ up $($no pun intended$).$ He hired a skilled tax attorney at a tax

advisory firm, Frank Fixer & Co$.$ to address the situation and resolve the issue so he can go on with this

life collecting Air Jordans and such. Larry made it very clear to Frank that he was not going to $$go after$$

Mary for these mistakes. He simply wanted his taxes sorted with the IRS.

Ultimately, Enforcement Officer Carlos Collector, an IRS Revenue Officer, showed up at Fixer$$s

offices in Los Angeles $($gun and badge in tow$)$ to discuss Larry$$s situation with Frank. Collector$$s job

was only to collect the taxes owed. Collector stated that during the Tax Tears at Issue, Taxpayer owes:

$$441,310($in $$IRS Taxes$).$ Collector explained that a tax lien would be filed on Larry$$s house, a $$2\mathrm{.}2$

million hillside bungalow in the Bel$-$Air adjacent neighborhood of Beverly Glen in Los Angeles, which

Larry shares with his wife and dog, Duff. Larry carries a mortgage note of approximately $$1\mathrm{.}5$ million

on Beverly Glen, held by the bank which is in first position.

$1$

Acct $571$ Tax Research

Final Exam

Given all this insanity, Larry divested from the sneaker business, left the LLC in exchange for his

partners$$ full and complete indemnification of the sales tax debt owed by the LLC; he did this by issuing

his shares back to the LLC and decided to start over. This means Larry is only on the hook for the IRS

Taxes he owes. He plans to re$-$enter the sneaker and resale market in December, $2024$ with a new

e$-$commerce$-$based platform that will $$for sure go crazy$.$

III. Engagement, Research & Deliverable.

$1.$ Prepare an analytical document advising Larry.

$2.$ Present the multiple questions of tax law and tax fact the answer of which will solve Larry

Taxpayer$$s problem and what is at stake for Larry $($Issues$)?$ Note: this is a fed tax exam; do not

discuss sales taxes. TIP: Remember that one of the issues to be addressed is based around how

the IRS gets to collect what is owed and the processes it uses to do so$.$

$3.$ Explain your analysis to Larry and do not forget to explain what the lien is about and do this in

the: Tax Law & Analysis section of your document.

$4.$ Research IRC Section $752$ on Checkpoint Edge and access IRS Publications $1,542,594$ and $1660$

to advise Larry of his options.

$5.$ Outline your exam before you populate your memo template.

$6.$ Set forth your advice in the memorandum template.