Assume Raylan is your client and prepare a brief research memo, complete with citations and analysis of primary authority, to support your conclusions..
Tax Research Assignment
AC 371 – Income Tax I
Due Date: September 3, 2014 (by the beginning of class)
General Information
This assignment is designed to get you thinking about tax research and give you
a little practice with a key tax resource. Given the volume of rules that comprise
our federal income tax system, it is impossible for one person to know everything
about taxes. Instead, tax practitioners generally gain a basic understanding of
key components of the tax computation and a more thorough understanding of
their area of specialization. To complement this understanding of the rules, tax
practitioners must also possess the ability to find answers to questions that
extend beyond their knowledge. This assignment will give you some insight to
the basic process that tax practitioners use to perform tax research.
Requirements
1. Each of you will be given a hypothetical scenario about a client (listed
below). You will look in Chapter 2 of your textbook for information on how
to conduct tax research. You may also wish to look at the supplemental
PowerPoint presentations posted on Blackboard Learn under the
Research Project folder for additional guidance.
2. You will search the tax code, regulations, and court cases to find an
answer to your client’s situation. Stick to sources of primary authority
(defined in Chapter 2) whenever possible. The Bruno Library offers
several electronic databases that students may use to browse various tax
authorities. Links to these databases are provided at
http://brunolib.cba.ua.edu/search/databases/dbtax.html.
3. You will write a memo to the working paper file (two pages or less) noting
the tax consequences for your client (whether the item is income or not,
whether the expense can be deducted or not, etc.) to turn in on or before
the assigned due date. This document should cite the relevant tax code,
regulations, and cases that you used in making your determination.
4. If you have any questions, please let me know (cemccoy@ua.edu). An
example of a research memo has also been posted under the Tax
Research Case folder to offer guidance on formatting, language, etc.
2
Grading
Per your class syllabus, this assignment is worth 50 points. Your assignment will
be assessed on the following basis:
(i) Organization with respect to format and neatness.
(ii) Completeness (answer to client’s situation, relevant tax authorities).
(iii) Communication skills are necessary for a successful professional
career. Treat your memo to the file as professional communication;
thus, your memo or letter should be free of spelling, grammar, or
punctuation errors.
(iv) Remember, this is an individual assignment. You may ask general
questions of each other, and you may work together to find relevant
authorities in the CCH Tax Research NetWork, RIA Checkpoint, etc.
However, the memo you turn in describing your solution must be your
own work. If you have questions or issues, please let me know.
Hypothetical Taxpayer Information
In February 2014, U.S. Deputy Marshal Raylan Givens used TurboTax software
to complete his 2013 personal income tax return. When Raylan was nearly
finished with his return, TurboTax presented Raylan with a promotional offer
claiming to increase his federal income tax refund. Specifically, if Raylan elected
to receive any portion of his federal income tax refund in the form of a gift card to
Amazon.com, Intuit (the makers of TurboTax software) offered to match an
additional 10% of the elected amount in Amazon.com gift certificates, free of
charge. Raylan’s total tax refund was $6,000, and he elected to apply $5,000 of
his total refund to this offer. Raylan received an Amazon.com gift card from Intuit
in March 2014 for $5,500 (i.e., $5,000 applied refund plus 10%). Raylan used
the entire $5,500 gift card to purchase a new high-definition television and sound
system so he could watch all of his favorite shows in style.
Based on the facts above, what amount of the $5,500 gift card, if any, does
Raylan need to recognize as gross income for tax year 2014? Why? Assume
Raylan is your client and prepare a brief research memo, complete with citations
and analysis of primary authority, to support your conclusions. Remember that
Raylan is not a professional tax preparer, so it is important that you explain your
position in a clear and concise manner that is not overly technical (i.e., do not
copy and paste excerpts from primary authorities and call it a day).
