tax memo

ACC 430 – Tax Research Project Guidelines and Topics

Steps to complete the project:

Turn in a written summary of your analysis (paper copy). Use the TAX FILE MEMORANDUM example from p. 107 in the textbook as a template for what you should turn in (that is the memorandum should have sections titled “Summary of Facts”, “Research Issue”, “Law and Analysis”, and “Conclusions”). The syllabus asks you to turn in a letter to the client but I am changing the assignment to the TAX FILE MEMORANDUM. The final memorandum should be 5 pages or less, single-spaced (I would expect it to be around 2 pages).

Grading:

I will base 20 (of 50) points on how effectively you communicate your analysis, so take time to make sure that your project is well-written. The remaining 30 points will be based on how well you support your conclusion using the sources (Internal Revenue Code, Treasury Regulations, IRS Rulings, and court cases) you find.

Citations:

DO NOT plagiarize. Use parenthetical referencing (APA style is an example) to cite your sources. See

http://libguides.asu.edu/content.php?pid=122697&sid=1054535

.

Tips for a Well Written Paper:

Be Concise: Tax issues are often complex. Regardless, your job is to research an issue, analyze and synthesize your findings, and report on your findings in a succinct and cohesive manner. You add value to the reader by paring down a lot of information into a few key points. The sections/paragraphs of your paper should clearly convey those few key points.

Be Clear: No matter how complex your topic is, make sure your writing is clear and readable. Read every sentence your write out loud to yourself and your team members and ask yourselves, “Do the ideas expressed in these sentences make sense? Would they make sense to a colleague, a neighbor, a parent?”

Be accurate: An analysis is only as good as the information and research that underlies it. Be sure to use a variety of sources and be sure to critically evaluate those sources. You can access sources through the CCH Tax Research database available through ASU’s library. You may also be able to use the internet to access current articles related to these topics.

Choose one of the following projects to research for our class:

Your client, ABC Corporation, structured a like-kind exchange with an unrelated party using a qualified intermediary, QI4U.com. Unfortunately, QI4U.com was poorly managed and declared bankruptcy AFTER acquiring the property from ABC but BEFORE completing the exchange. How should this transaction be treated for tax purposes? Assume that any payments recovered in full satisfaction of the intermediary’s obligation will not be received for over a year. Also, discuss how the tax treatment differs if the subsequent payment in full satisfaction of the intermediary’s obligation exceeds or does not exceed ABC Corporation’s basis in the exchanged asset. Support your position with relevant citations from the Internal Revenue Code, Treasury Regulations, IRS Rulings, and court cases.

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Lucille is an avid boater living near Gotham city. Gotham has recently created a harbor improvement special assessment district to oversee renovations to the public boat docks and boardwalk area surrounding the city harbor. The special assessment district plans to issue bonds to fund a portion of the planned improvements. Lucille is considering an investment in these bonds, but is unsure whether the interest income she would earn qualifies for tax exemption. Prepare a written memorandum stating the research issue(s), your conclusions concerning the issues(s), and the specific statutory, regulatory, or judicial authority supporting your conclusions.

TAX FILE MEMORANDUM

Summary of Facts

Lucille is an avid boater living near Gotham City. Gotham has recently created a harbor improvement special assessment district to oversee renovations to the public boat docks and boardwalk area surrounding the city harbor. The special assessment district plans to issue bonds to fund a portion of the planned improvements. Lucille is considering an investment in these bonds, but is unsure whether the interest income she would earn qualifies for tax exemption.

Research Issue

Does interest earned on bonds issued by special assessment district of a city government qualify for tax exemption?

Law and Analysis

Internal Revenue Code (IRC) Section 103(a) provides that gross income does not include interest on any State or local bond. The term ‘State or local bond’ is defined in Section 103(f)(1) to mean an obligation of a State or its political subdivision. Thus, in order to exclude bond interest from taxation, the special assessment district of Gotham City must be considered a political subdivision of the state in which the city is located.

Treasury regulations under Section 103 expand on the definition of a political subdivision. Reg. Sec. 1.103-1(b) provides that obligations issued by or on behalf of a local governmental unit by authorities empowered to issue such obligations are considered obligations of the unit. Further, the term political subdivision may include special assessment districts, such as road, water, sewer, gas, light, school, harbor, port improvement, and similar districts and division of such governmental unit.

Conclusion

Gotham City’s special assessment district qualifies as a political subdivision of a State or local government. As a result, interest earned on bonds issued by the special assessment district in excluded from gross income under Section 103(a).