Prepare a detailed Client Letter analyzing a specific tax scenario. It is critical that you identify the tax issues and reference Federal Tax Law primary sources Be sure to use keyword searches in the CCH or RIA tax services to identify the applicable tax laws. Be sure to cite the primary source (i.e., Code, Regulations, Revenue Rulings, etc.). A tax service and its interpretations or explanations cannot be cited as authority when representing your client before the IRS of in court. CCH and RIA are available at the university libraries website Hints: The tax issue underlying the problem Bridget faces is whether the gain on the disposition of the publicly traded stock constitutes portfolio income or passive activity income. If classified as passive, it could be offset by current and suspended activity losses from the restaurant partnership. However, if it is treated as portfolio income, the entire $125,000 gain is taxed, while the current and suspended passive activity losses remain unused . In a classroom setting there are often very clear right or wrong answers, however in the real world things become subjective. This is especially true for U.S. taxation. The solution to Q5 is not obvious, it is an example of how subjective taxation can be. You will be expected to find/identify, understand, and analyze the appropriate code section and then make a decision as to whether the gain is capital or passive. I will not grade the decision, only the justification/defense of your position. Do not answer the question without explaining why Capital Gains/losses are gains/losses on capital assets. Capital Assets are defined in the PowerPoints as everything except: (1) Inventory, (2) Notes and accounts receivables acquired from the sale of inventory or performance of services, (3) realty and depreciable property used in a trade or business ($1231 assets), (4) certain copyrights, (5) U.S. publications, (6) Supplies of a type regularly used or consumed in the ordinary course of a business. The most common type of capital assets are (1) assets held for investments, or (2) personal use assets Passive income/losses are also defined in the PowerPoints as income/losses from any trade or business in which the taxpayer does not materially participate. Generally passive losses can only offset passive income (i.e. they cannot reduce active or portfolio income) . Prepare a detailed Client Letter analyzing a specific tax scenario. It is critical that you identify the tax issues and reference Federal Tax Law primary sources Be sure to use keyword searches in the CCH or RIA tax services to identify the applicable tax laws. Be sure to cite the primary source (i.e., Code, Regulations, Revenue Rulings, etc.). A tax service and its interpretations or explanations cannot be cited as authority when representing your client before the IRS of in court. CCH and RIA are available at the university libraries website Hints: The tax issue underlying the problem Bridget faces is whether the gain on the disposition of the publicly traded stock constitutes portfolio income or passive activity income. If classified as passive, it could be offset by current and suspended activity losses from the restaurant partnership. However, if it is treated as portfolio income, the entire $125,000 gain is taxed, while the current and suspended passive activity losses remain unused . In a classroom setting there are often very clear right or wrong answers, however in the real world things become subjective. This is especially true for U.S. taxation. The solution to Q5 is not obvious, it is an example of how subjective taxation can be. You will be expected to find/identify, understand, and analyze the appropriate code section and then make a decision as to whether the gain is capital or passive. I will not grade the decision, only the justification/defense of your position. Do not answer the question without explaining why Capital Gains/losses are gains/losses on capital assets. Capital Assets are defined in the PowerPoints as everything except: (1) Inventory, (2) Notes and accounts receivables acquired from the sale of inventory or performance of services, (3) realty and depreciable property used in a trade or business ($1231 assets), (4) certain copyrights, (5) U.S. publications, (6) Supplies of a type regularly used or consumed in the ordinary course of a business. The most common type of capital assets are (1) assets held for investments, or (2) personal use assets Passive income/losses are also defined in the PowerPoints as income/losses from any trade or business in which the taxpayer does not materially participate. Generally passive losses can only offset passive income (i.e. they cannot reduce active or portfolio income)