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prepare a memorandum to the tax file ( You DO NOT need to prepare a client letter ) . Please see Chapter 5 , pages

prepare a memorandum to the tax file ( You DO NOT need to prepare a client letter). Please see Chapter 5, pages 5-15 and 16 for an example. Your memorandum should include the Facts, Tax/Research Issue(s), Conclusion, and Analysis. Use a database to help find the indicated research
The relevant facts are:
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. Sallys broker, Max, has standing oral instructions from her on sales transactions to sell the shares with the highest cost basis.
In October 2023, Sally phoned Max and instructed him to sell 6,000 shares of Color, Inc. Immediately before the sale, her portfolio had 15,000 shares of Color, 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 2023 income tax return, Sally used the specific identification method to calculate a $75,000 recognized gain on the sale. On audit of her 2023 return, the IRS has taken the position that under Reg. 1.1012-1(c) Sally should have used the FIFO method to report the sale of the Color 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 Sallys 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 law. These sources should provide you with adequate information to come to a definitive conclusion regarding whether or not Sally will achieve the results she is hoping for.
1. You will find guidance in Reg. 1.1012-1(c). Be sure to cite this regulation in the memorandum.
2. The following court case will also provide guidance.
Concord Instruments Corporation, 67 TCM 3036, T.C. Memo 1994-248

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