Tax Research

Instructions: For each of the following cases, conduct tax research to answer the tax issue posed in the case. Your research needs to include a sufficient amount of primary sources to support your conclusion. Primary sources from each of the three categories we have discussed need to be included in your final memo. You may format your memo in any way that you choose. The body of your memo must be written in long form prose (ie full sentences) and include your primary source citations. Citations should be provided in text. No works cited page is required.

If during your research you discover a need for additional items of fact, you may make any necessary assumptions to fill in those gaps. You must include your assumption in your research memo so that I can follow your reasoning.

The length of your memo will depend on the complexity of the situation and the amount of primary sources you discuss. In general, a memo should be no shorter than one page. Format your memo double spaced with 12 point font.

You may work in groups to complete this assignment. Each group is limited to four members. A group only needs to submit one copy of the final write up for grading. Be sure to include the names of all group members so that points can be awarded accordingly. You may also complete this assignment solo if you prefer. Submit your final write up via the Blackboard Assignment posting.

Cases:

1. Emily’s department is required to attend a business meeting in Orlando, Florida. To reduce the costs, the employer charters a 16-passenger plane. Because only 10 employees are attending the meeting, Emily is permitted to bring her husband and daughter along on the flight. How much income will Emily recognize for this fringe benefit?

• Joe Roberts, 22 years old, is the star of the State University basketball team. He will likely be selected in the first round of the NBA draft. Needless to say, Joe is being wined and dined by several sports agents, and each has been providing Joe with “incentives” to be selected as his agent. These incentives range from trips to Las Vegas to Rolex watches. This is all overwhelming for Joe, as he grew up on a farm in Kansas. His parents are also being wined and dined in hopes that they can influence him in his choice of agents. After finally selecting an agent, the time has come to negotiate with the basketball team that selected him. Joe relies completely on the agent in these dealings. Joe is just interested in playing ball, and he does not really care much about the financial details. Joe’s agent is in the final negotiating stages with the San Antonio Spurs. The potential offer is $3.5 million for the first year, a signing bonus, and incentive bonuses based on his and the team’s performance plus fringe benefits. These benefits will include health and dental insurance, life insurance, a team car, a clothing allowance, a travel allowance for him and his family, free tickets to each game, and all the training and fitness coaching he needs. A retirement plan is a separate benefit to be negotiated. Joe has come to your firm for tax guidance with regard to the package offered by the Spurs. Provide Joe with a tax analysis of the compensation package. Suggest any tax planning that could help Joe maximize his lifetime wealth.

NOTE: due to the length of this case, it is worth up to 40 points on this assignment

• Richie is a wealthy rancher in Texas. He operates his ranch through a grantor trust set up by his grandparents. Richie does not like to get his hands dirty, so he hires a professional management company to run the ranch. The property generated a $500,000 loss this year. Can Richie deduct this loss on his Schedule E given the material-participation rules of IRC § 469?

• Can an individual make a contribution to an IRA based on the receipt of unemployment compensation?