Your client, Moudy Inc., is a large technical consulting firm in Utah. This past year, Moudy. hired several new consultants to help serve their growing client base. To hire top talent, Moudy conducted a national search and most of the new consultants were hired from sufficient distance to warrant relocation. As part of its offer to the best candidates, Moudy offered aide in relocating the consultants, including purchasing the consultants homes in their prior location if they were unable to sell their homes within 30 days of listing them for sale. Ultimately, Moudy bought several homes from its new consultants, each for 5 percent less than the list price, and Moudy continued to list the homes for sale. Each home Moudy purchased was ultimately sold at a loss, and by the end of last year, the loss totaled $350,000. Moudy has no capital gains and does not anticipate any in the near future, and B. Angelo, the CFO of Moudy, Inc., asserts the losses are ordinary because they are essentially compensation expense, especially considering the losses are short-term. Still, Angelo would like your assurance that he is fact correct that Moudy may deduct the losses as ordinary. Since Angelo and Moudy, Inc. prefer the losses be ordinary, in the event you find a different answer, you should advise the client how, if possible, these transactions could be structured in the future to make sure the losses are ordinary and immediately deductible.

Write, in good form, a memo to Mr. Pennyworth summarizing your findings and concluding with your determination of the appropriate tax answer, as well as any recommendations. Your memo should not exceed one page. Your memo should contain at least two citations of primary sources.

Your final submission will be graded largely for completion of the research process, rational arguments for the findings, relevant discussion of your findings, and proper form for professional business communications. While students wishing to receive a perfect score will need to present the correct answer, many quality submissions earning high grades may not have the right answer.