02 May MemorandumTo: Tax Research StaffFrom: Tax Research ManagerRe: Client Tax Issue
Memorandum
To: Tax Research Staff
From: Tax Research Manager
Re: Client Tax Issue
In working with one of our newest clients, Thomas Alluvia, a number of important facts have been discovered that may have tax implications. We want to advise Thomas to take tax positions that, while aggressive, are reasonably defensible.
Write a tax research memo identifying the Relevant Facts, Issues Identified, Conclusions, and Authorities and Reasoning for the tax problem listed below. Apply at least one relevant court case.
Write clearly and concisely . Use the APA style on margins, fonts, grammar, punctuation, writing skills, and spacing. Do not copy and paste the facts as listed below. You should include only the relevant facts and use your own words whenever possible.
Tax Problem:
With the changed tax law there are questions about whether the cost of meals are deductible at all. In particular, Thomas incurred meal costs while carrying on his gambling activity. Because he visits the casinos on a regular basis, the casinos reward him with ‘’comps’’ In the form of hotel rooms, food, and beverages. In addition, in another setting, Thomas incurred meal costs while entertaining his own employees and business associates abroad his yacht.
During Thomas’s 34-year marriage, his wife experienced a variety of ailments. On several occasions, including this year, Thomas and his wife traveled to California to obtain marijuana to treat one or more of her ailments. The sole purpose of their trip to California was to obtain the marijuana legally. It was then illegally transported to Texas where marijuana possession-even for medical use-remains illegal. Another trip taken by Thomas and his wife was to a remote location in Montana at the suggestion of his personal physician. The purpose of the trip was to attend a clinic that specializes in unconventional treatment of tension and stress. For Thomas, those medical issues were induced by his involvement in high-risk business investments.
Early in 2018, our client received an anonymous cash payment. Thomas does not have any recall of the event that led a person to send the money. The sender merely stated that the money was stolen from Thomas’ business a long time ago and is now being repaid. Since Thomas could not recall the event, he decided to send the cash to a local homeless shelter.
Since Thomas’ business requires frequent travel, he decided to learn how to fly his own airplane. In 2018, Thomas paid for lessons and was able to acquire his pilot’s license. As you might have expected, he then bought a partial interest in an airplane that he flies to meet with customers. He also uses the plane for short trips with his wife.
Finally, Thomas borrowed against the equity in a parcel of unimproved real estate. The property cost 450k in 2012 and is now worth about 2.2 million based on appraisals by experts. Thomas wants to hold the property but needs additional cash to finance his other business interests as well as pay for his kid’s college tuition. To that end, Thomas borrowed 600k using the equity as security for the loan. About 35,000 in interest was paid on the loan in 2018.
Consider the events described and then provide your analysis of the proper tax treatment for any identifiable tax issues. It is critical that you provide substantive authoritative support for your recommendations.
1. Identify the facts
2. Determine the specific tax issue
3. Locate and evaluate relevant primary authority
4. Reach a reasoned and supported conclusion
5. Conclusion and recommendation to the taxpayer
6. The research should be 4-5 pages long
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