Rex Tumbleweed Banyon was a big western movie star back in the 1950s and 1960s. Now in his late 80s and not in the best of health, Rex has not been a working actor for many years. Rex has also fallen into some financial difficulties. He and his third wife live in a beautiful ranch home near Santa Barbara, California that he purchased about ten years ago for $4 million when he was in better financial and physical condition. Rex is presently several months behind in his mortgage payments (he owes about $3.6 million of recourse debt on the outstanding loan) and the bank has started collection and foreclosure proceedings. A sympathetic loan officer alerted the media to old Tumbleweeds plight and several stories about Rexs problems have run in the national press and on television. One person moved by the story is Dot Matrix, a very successful and wealthy software designer. Dot fondly remembers going to Saturday Matinees as a child and watching Tumbleweed put an end to the evil doings of assorted varmints and bad-apples. She decides to help Rex in his time of need by having her company purchase his ranch home from the lender (appraised value of $3.2 million the bank agrees to write off the $400,000 excess of debt over value) and lease the home to Rex and his wife for $1.00 per month. Dot figures the Santa Barbara property is a good long-term investment and the value of the media coverage of her act of kindness to old Tumbleweed (Dot is certain she and her software company will get plenty of favorable publicity) aint too shabby either. On August 1, 2020, Rex and his wife execute a Deed in lieu of Foreclosure, conveying the house to the lender in exchange for being released from the debt. Simultaneously, Dot purchases the home from the lender for its appraised value and a grateful Rex and his wife execute a renewable five-year lease on the home at $1.00 per month. A comparable rental in Rex's neighborhood is presently running about $6,000 per month.

Instructions:

Attached is a research memorandum template (with certain explanations) you are to use in preparing your actual research memorandum. You are to use this template in preparing your research memorandum and are not to alter or modify the format to any material degree.

Format:

TO: Hy Incmm Tax Partner in Charge

FROM: Name Assistant Tax Specialist

DATE: April 20, 2021

SUBJECT: Research Project Research Case Number 15

FACTS:

In this section of the memorandum a student should essentially copy the facts (text) of the case problem you have selected from the posted list (to the extent your case specifies a general question(s), do not include that language here but below in the Queries section). You must not make any material modifications or embellishments to the facts of the problem as provided.

QUERIES:

In this section of the memorandum, a student would delineate in sufficient detail the tax question or questions identified in the case facts. This section pertains to Phase 1 of the project and is your first significant challenge to identify what the major tax issue or issues is/are in your case. While your case may already contain a general question or statement, a student generally must augment and/or restate the question(s) in greater detail. Note the due date of Phase 1 as specified in the course syllabus students must submit the tax issue(s)/query(ies) they have identified via the Canvas In/Outbox Function - see Appendix A to the course syllabus for more information.

CONCLUSIONS:

This section of the memorandum sets forth, in concise summary form, the conclusions derived from the arguments and authorities set out below. There should not be any intuitive leaps all conclusions should flow from the cited research.

ARGUMENTS AND AUTHORITIES:

This section of the memorandum contains a students technical analysis of the issue(s) at hand along with appropriate supporting citations (proper citation format is important). This analysis should include all pertinent and relevant primary sources (e.g. IRC, Revenue Rulings, Treasury Regulations, court cases, etc.) as well as any secondary sources used to support the analysis (e.g. CCH/RIA explanation). Emphasis must be placed on primary sources do not simply cut and paste a CCH/RIA explanation or IRS Publication and call it a day. Students should generally list at least three (3) primary sources in completing this project. For example, a student might include the relevant IRC section, a related Treasury Regulation and a Revenue Ruling or Court Case addressing their issue. There are two sample research memorandums posted to Canvas to give the student a better idea of what this section of the memorandum might contain.