The facts for the first assignment are as follow:
In 2009, Mr. Smith purchased a principal residence for $1,500,000. He made a down payment of $300,000 and financed the remainder by borrowing $1,200,000 through a loan secured by the residence. In 2009, Mr. Smith paid interest that accrued on the indebtedness during that year. He had no other debt secured by the residence. May he deduct the entire amount of interest which was paid on the home loan?
Your research assignment will be graded using the following criteria:
- Recognition of the important facts and issues
- Correct conclusion
- Proper citation of relevant sources
- Format, Spelling & Grammar
- Clarity of writing
Tax Research Assignment
The five steps in tax research are:
- understand the facts
- identify issues
- locate relevant authorities
- analyze the tax authorities
- communicate research results.
The two types of tax services that tax professionals use in tax research are annotated tax services, arranged by code section, and topical services, arranged by topic.
Research questions often consist of questions of fact or questions of law.
- The answer to a question of fact hinges upon the facts and circumstances of the taxpayer’s transaction.
- The answer to a question of law hinges upon the interpretation of the law, such as interpreting a particular phrase in a code section.
When the researcher identifies that different authorities have conflicting views, she should evaluate the “hierarchy,” jurisdiction, and age of the authorities.
Once the tax researcher has identified relevant authorities, she must make sure that the authorities are still valid and up to date.
The most common end product of a research question is a research memo, which has five basic parts: (1) facts, (2) issues, (3) authority list, (4) conclusion, and (5) analysis.
Sample Research Memo
Facts: Discuss facts relevant to the question presented—that is, facts that provide necessary background of the transaction (generally, who, what, when, where, and how much) and those facts that may influence the research answer. Keeping the fact discussion relatively brief will focus the reader’s attention on the relevant characteristics of the transaction.
Issues: State the specific issues that the memo addresses. This section confirms that you understand the research question, reminds the reader of the question being analyzed, and allows future researchers to determine whether the analysis in the memo is relevant. Issues should be written as specifically as possible and be limited to one or two sentences per issue.
Authorities: In this section, the researcher cites the relevant tax authorities that apply to the issue, such as the IRC, court cases, and revenue rulings. How many authorities should you cite? Enough to provide a clear understanding of the issue and interpretation of the law. Remember, in order to reach an accurate assessment of the strength of your conclusion, you should consider authorities that may support your desired conclusion, as well as those that may go against it.
Conclusion: There should be one conclusion per issue. Each conclusion should answer the question as briefly as possible, and preferably indicate why the answer is what it is.
Analysis: The goal of the analysis is for the researcher to provide the reader a clear understanding of the area of law and specific authorities that apply. Typically, an analysis will be organized to discuss the general area(s) of law first (the code section) and then the specific authorities (court cases, revenue rulings) that apply to the research question. How many authorities should you discuss? As many as necessary to provide the reader an understanding of the issue and relevant authorities. After you discuss the relevant authorities, apply the authorities to your client’s transaction and explain how the authorities result in your conclusion.
