Tax Memorandum Assignment

Situation

You have recently acquired a new corporate tax client, A Corp. that is in the business of developing and producing specialized widgets. As you begin reviewing the clients tax filings and financial records, you notice that the client has entered into a collaboration agreement with another corporation, B Corp. The agreement stipulates that your client has granted rights to B Corp to co-promote the widgets in the US, as well as develop a market for the widgets internationally. Your client and B Corp will share in the collaborations profits and losses and each party will maintain complete and accurate records relevant to costs, sales, and payments. Your client and B Corp. will be selling the widgets under trademarks that they own jointly. During your research, you also find side agreements that stipulate that your client and B Corp. intend for their relationship NOT to be treated as a partnership. A Corp. and B Corp. have not filed partnership returns (Form 1065) throughout this arrangement. As part of the due diligence for this engagement, you need to determine whether this is proper or not and document your findings for the clients file.

Assignment

Prepare a memorandum for the tax files for A Corp. determining whether the arrangement between A Corp. and B Corp. is being properly treated for tax purposes. Your discussion should include whether the position currently being taken is allowed and if not, why not, and what would be the proper position. You will need to include footnote references to any sources you use. Please only cite primary authority (IRC, regulations, IRS interpretations, case law etc.).

Please follow the format provided for your memorandum. The memo should be prepared using a word processor (such as MS Word) and use proper footnote referencing and proper citations. There is no minimum length for your memo, but please try not to exceed 2 pages unless you absolutely feel that you cant sufficiently answer the question in 2 pages or less.

The memo should be in your own words. I do not want to see that you have copied and pasted editorial content from RIA or any other tax research search engines or other sources into your memo. This will be considered plagiarism and be subject to the procedures for academic dishonesty as outlined in the syllabus.

Hints for your research assignment:

1.) There is a Chief Counsel Advice Memorandum (IRS interpretation) out there that deals with this issue directly, but there are other sources that will get you to the same answer. As you long as you find the proper position and support it with a primary authority, I will give you credit.

2.) When starting your research, keyword searches are the best way to go (do a search around the key concept in this assignmentcollaboration vs. partnership). In most cases, you are going to start with the explanations in the tax research software (think Federal Tax Coordinator).