Tax Research Memo

7-1/1/4-e_ ckkt 1c5110 Tax Memo To: Research Staff From: Research Manager Date: September 25, 2015 Re: Client: Indira Patel I am preparing a tax return for Indira Patel. In order to complete the return and be able to defend the positions taken there are several issues that need to be evaluated. Please take a look at these facts and provide a basis for the appropriate tax treatment. Indira is the CEO of a small closely held corporation, Infranet, Inc. In her capacity as CEO Indira is required to entertain clients and conduct important business discussions. In addition, the company wants to project the appearance of success to their high-end customers. To that end Infranet, Inc. provides Indira with a house located in a tony part of the city. The company also provides maintenance for both the inside and outside of the home. Indira lives there year round with her husband and three small children. Indira recently spent $66,000-(6Q% reiutM94 by Infranet,Inc)Jpadd_extra_au extra room to house her personal collection of vintage collectibles that have historical significance to her home country. (She is a U.S. Citizen.) The collection tends to iiftet-7E— Infranet, Inc. clients who come to the home for entertainment events and to conduct business in a comfortable and quiet atmosphere. In March, 2015, Indira was approached by Hector, an old acquaintance, who was seeking to capitalize on their friendship and mutual interest in collectibles. Hector asked Indira for an introduction to the CEO of a medium sized manufacturing company, hoping to establish a business relationship that might lead to new business for Hector. The connection proved successful. Hector thanked Indira by giving her a check for $5,000. Indira immediately endorsed the check to her alma mater, the University of St. Thomas, rather than , taking the money for herself In addition to her work for Infranet, Inc., Indira enjoys working in her garden. As an amateur botanist, Indira joined with her sister and authored a book on home gardening. The book featured a variety of materials, including photographs that Indira and her sister took while traveling to see gardens in her hometown and across the state and into neighboring states. Altogether, Indira spend $12,933 in travel costs, $6,223 to have the book published, and $1,220 to promote the book. Revenues totaled $4,769 in 2015. Unrelated to the facts described above, Indira's husband Javod, who is actively engaged as a motivational speaker, received a certification in advanced "motivational psychology". This certification is offered by a professional organization to which he belongs and cost $12,300 for required courses, books and related materials. The organization represents the interests of its members and acts as a clearinghouse for groups that wish to engage the services of motivational experts like Javod. Please let me have your analysis on or before October 20. Thanks Note: you must cite at least four cases or rulings that pertain to the tax issues, and carefully explain how the cases and/or rulings apply. (It is also suggested that you cite appropriate tax code and regulations, but those don't count toward the four cites. IRS publications don't count either). Grading: 30 points for organization, grammar, spelling; 20 points for correct citations of sources; 50 points for analysis, explanation, and recommendation Refer to the guidelines provided on Blackboard in writing your response. See below for the CPA Exam reminder that accompanies requirements to write memos or letters: REMINDER: Your response will be graded for both technical content and writing skills. Technical content will be evaluated for information that is helpful to the intended reader and clearly relevant to the issue. Writing skills will be evaluated for development, organization, and the appropriate expression of ideas in professional correspondence. Use astandard business memo or letter format with a clear beginning, middle, and end [In our case use the basic divisions as discussed in class]. Do not convey information in the form of a table, bullet point list, or other abbreviated presentation.