PLEASE READ THESE INSTRUCTIONS CAREFULLY
1. The jurisdiction of this paper is federal in nature and the Internal Revenue Code (“IRC”), the Treasury Regulations (“Treas. Reg(s).”) promulgated thereunder, federal case law, and publications of the Internal Revenue Service (“IRS”) are deemed to control.
2. You are an associate in the fictional accounting firm of Grande & Simmons, LLP (“GS”). Your client, CP America, Inc. seeks tax advice and planning for purposes of its corporate tax returns.
3. You will have two sets of materials with which to work: (1) the File; and (2) the Library. You will be called upon to distinguish relevant from irrelevant facts, analyze the authorities provided, and prepare an analytical PowerPoint, for purposes of tax planning.
4. The File contains factual information about your case in the form of several documents. The first document is a file memo to you from your supervising partner, Mr. Simmons. His internal memo contains the instruction for the tax planning PowerPoint you are to draft.
5. The Library contains the authorities mentioned in #2 of these instructions. You should assume that the requisite tax law provided is in the only relevant authority for purposes of tax planning. Incorporation and/or citation of other authority not contained in the Library will adversely affect your grade because it may lead to analyses other than that which is required for purposes of this examination.
6. Your PowerPoint to the client’s Tax File should be written in the electronic template provided to you. In preparing your PowerPoint, you should concentrate on the materials provided, but you should bring to your analysis of the problem, your general knowledge of tax and accounting combined with the issue spotting and tax analysis skills which you have been developing in this course. This includes: (1) articulating the tax issue; (2) applying the tax law to the facts; (3) thoroughly explaining how you reached your conclusion.
7. In citing authority please use the following format (eliminating quotation marks):
a. The Internal Revenue Code “IRC” followed by only the section number. For example section 1031(a)(1) of the IRC is “IRC 1031(a)(1)”
b. The Treasury Regulation(s) “Treas. Reg.” followed by only the section number. For example section 1.1031(a)(1) of the Treas. Reg. is “Treas. Reg. 1.1031(a)(1).”
c. Cite an Example in a Treas. Reg. as, “Treas. Reg. 1031.1(a)1, Example 1.”
d. Cite this publication found in the Library as:
i. The first instance: “Rev. Rul. 89-121”
ii. Thereafter: “Rev. Rul. 89-121,” or the “Rev. Rul.”
e. Important: If there is other authority cited in the document you are using, cite to the document you are using. For example, if the TAM cites to a case or a code section, and you want to incorporate that language into your memo, cite the TAM. Do not worry about citing to the case or the law that is cited by the TAM.
Grande & Simmons, LLP
Tax Advisors Orange County, California
TO: TAX STAFF ADVISOR
FR: PQ SIMMONS, TAX PARTNER
RE: Like kind exchange issue.
Dear Tax Associate:
Please see the following information regarding our client, Adam Carter. I am asking you to work on some the planning issues because I think you’re one of the sharper tax staff members and I would like to work with you more on this. The current economic climate has made this client very budget conscious, so please spend no more than three (3) hours to research and write this up.
Here is the pertinent information about the Client (below).
Our client, Adam Carter has a very small but successful landscape business. For over twenty years Mr. Carter has provided landscaping services to a wide range of customers including office buildings, strip malls, and private homes and gardens. Mr. Carter also provides a full menu of landscape maintenance services that range from turf maintenance to creative color designs. His landscape installation work is focused in landscape and irrigation installation and renovation. In 2019, Mr. Carter trades a concrete ready mix truck and a general purpose truck used in his landscape business to Katie Salazar Jackson for an ore truck and a general purpose truck and $1,000 cash. Ms. Jackson deals in trucks.
The adjusted basis and fair market value of the items traded are as follows:
Basis Fair Market Value
Concrete ready mix truck $30,000 $36,000
General purpose truck 19,000 18,000
Ore truck 32,000
General purpose truck 21,000
As you can see, the facts above are very simple. I have tried to only give you the most relevant information here. So please, search and find the relevant authority(ies) that form the basis for your analysis. I would suggest that you read the attached revenue ruling (Rev. Rul. 89-121) to see what you’re dealing with and how to approach this issue.
Nevermind the fact that 89-121 modified a couple of other revenue rulings, just assemble the big picture from it as it will assist in your formulation of the issues and your planning overall.
Your memo should include the exact text of the authority(ies) and an explanation of the application of the authority to the facts. If there is any uncertainty about the validity of your answer, indicate the cause for the uncertainty. Also, please illustrate the calculations for the: (1) adjusted basis of the properties; and (2) amount of gain/loss realized on the exchanges.
Thank you for your assistance.
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