IntroductiontoTaxationSpring2017BrownProject2(50points)INSTRUCTIONS:Yourassignmentistoindividuallyprepareataxfilememorandum.PleaseseeChapter2,Exhibit2.7onpage226inthe2017Editionofthetextbookforanexample.Asintheexample,yourtaxfilememorandumshouldincludetheFacts,TaxIssue(s),Conclusion,andAnalysis.UsetheUMKClibrarywebsitetosearchtheCheckpointdatabase(UMKCLibrarywebsite/SelectDatabases/ClickCunderBrowseDatabasesbyName/SelectCheckPoint).AdditionalguidanceonconductingtaxresearchisprovidedinSection2.2WorkingwiththeTaxLawTaxResearchinChapter2beginningonpage218.

TAXPAYERINFORMATION:

Asaresultofalargeinheritancefromhergrandmother,Sallyhasasubstantialinvestmentportfolio.Thesecuritiesareheldinstreetnamebyherbrokeragefirm.Sallysbroker,Max,hasstandingoralinstructionsfromheronsalestransactionstoselltheshareswiththehighestcostbasis.

InOctober2016,SallyphonedMaxandinstructedhimtosell6,000sharesofBlue,Inc.Immediatelybeforethesale,herportfoliohad15,000sharesofBlue,whichwerepurchasedinseveraltransactionsovera3yearperiod.Attheendofeachmonth,thebrokeragefirmprovidesSallywithamonthlystatementthatincludessalestransactions.Itdoesnotidentifythespecificcertificatestransferred.

Infilingher2016incometaxreturn,Sallyusedthespecificidentificationmethodtocalculatea$75,000recognizedgainonthesale.Onauditofher2016return,theIRShas takenthepositionthatunderReg.1.1012-1(c) SallyshouldhaveusedtheFIFOmethodtoreportthesaleoftheBlueshares,resultinginagainof$140,000.AccordingtothisinterpretationoftheRegulations,Sallymaynotusethespecificidentificationmethod(andmustusetheFIFOmethod)becausethebrokerdidnotprovidewrittenconfirmationofSallyssalesinstructions.

Sallyhascometoyoufortaxadvicewithrespecttothisissue.

HINTYouwillfindguidancefromthefollowingsourcesoftaxauthority: 1. Reg.1.10121(c).Besuretocitethisregulationinthememorandum.2. Onceyouhavelocatedthisregulation,searchforcourtcasesrelevanttothisissueusingtheregulationsectionaboveasyourkeyword.Besuretociterelevantcourtcasesinthememorandum.Areviewofthefollowingcasewillbehelpful:ConcordInstrumentsCorporation,67TCM3036,T.C.Memo1994248

Yourscoreonthisassignmentwillbedeterminedasfollows:Professionalformat(seetextbookExhibit2.7)10PointsClearlywritten10PointsIdentificationofissue10PointsCitationandexplanationofappropriatetaxauthority*10PointsCitationandexplanationofappropriatecaselaw**10PointsTotal50Points

*Donotmerelycopytaxcode,regulations,etc.!Asinthebookexample(Exhibit2.7),thetaxauthorityshouldinformthediscussionintheAnalysissectionofthememo.Explaintherelevanttaxauthorityandhowitappliestothetaxpayerssituation.

**Besuretodiscusssimilaritiesanddifferencesbetweencourtcasefactsandthetaxpayersfactstotheassessrelevanceofjudicialdecisionstothetaxpayerssituation.

Introduction to Taxation Spring 2017 Brown Project 2 (50 points) INSTRUCTIONS: Your assignment is to individually prepare a tax file memorandum. Please see Chapter 2, Exhibit 2.7 on page 226 in the 2017 Edition of the textbook for an example. As in the example, your tax file memorandum should include the Facts, Tax Issue(s), Conclusion, and Analysis. Use the UMKC library website to search the Checkpoint database (UMKC Library website/Select \"Databases\"/Click \"C\" under Browse Databases by Name/Select \"CheckPoint\"). Additional guidance on conducting tax research is provided in Section 2.2 Working with the Tax Law - Tax Research in Chapter 2 beginning on page 218. TAXPAYER INFORMATION: As a result of a large inheritance from her grandmother, Sally has a substantial investment portfolio. The securities are held in street name by her brokerage firm. Sally's broker, Max, has standing oral instructions from her on sales transactions to sell the shares with the highest cost basis. In October 2016, Sally phoned Max and instructed him to sell 6,000 shares of Blue, Inc. Immediately before the sale, her portfolio had 15,000 shares of Blue, which were purchased in several transactions over a 3 year period. At the end of each month, the brokerage firm provides Sally with a monthly statement that includes sales transactions. It does not identify the specific certificates transferred. In filing her 2016 income tax return, Sally used the specific identification method to calculate a $75,000 recognized gain on the sale. On audit of her 2016 return, the IRS has taken the position that under Reg. 1.10121 (c) Sally should have used the FIFO method to report the sale of the Blue shares, resulting in a gain of $140,000. According to this interpretation of the Regulations, Sally may not use the specific identification method (and must use the FIFO method) because the broker did not provide written confirmation of Sally's sales instructions. Sally has come to you for tax advice with respect to this issue. HINT - You will find guidance from the following sources of tax authority: 1. Reg. 1.10121(c). Be sure to cite this regulation in the memorandum. 2. Once you have located this regulation, search for court cases relevant to this issue using the regulation section above as your keyword. Be sure to cite relevant court cases in the memorandum. A review of the following case will be helpful: Concord Instruments Corporation, 67 TCM 3036, T.C. Memo 1994248 Your score on this assignment will be determined as follows: Professional format (see textbook Exhibit 2.7) 10 Points Clearly written 10 Points Identification of issue 10 Points Citation and explanation of appropriate tax authority* 10 Points Citation and explanation of appropriate case law** 10 Points Total 50 Points *Do not merely copy tax code, regulations, etc.! As in the book example (Exhibit 2.7), the tax authority should inform the discussion in the \"Analysis\" section of the memo. Explain the relevant tax authority and how it applies to the taxpayer's situation. **Be sure to discuss similarities and differences between court case facts and the taxpayer's facts to the assess relevance of judicial decisions to the taxpayer's situation