Fed Taxes & Mgmt Decisions

Prepare a three-page memo (at least 900-1,500 words per page) to John and Jane Smith addressing the issues presented: 

1. John Smith tax issues:

a. How is the $300,000 treated for purposes of federal tax income?

b. How is the $25,000 treated for purposes of federal tax income?

c. What is your determination regarding reducing the taxable amount of income for both (a) and (b) above? 

d. Is it more beneficial to continue leasing the business space or to buy the building?

2. Jane Smith tax issues:

a. What are the different tax consequences between paying down the mortgage (debt) and assuming a new mortgage (debt) for federal income tax purposes?

b. Can John and Jane Smith utilize a 1031 tax exchange to buy a more expensive house using additional money from John’s case?

c. Does Jane have a business or hobby? Why is this distinction important?

d. Would Jane (and John) realize better tax benefits if she had a separate business for her jewelry-making activities?

e. What tax benefits would John realize if he invested $15,000 in Jane’s jewelry making?

f. Can Jane depreciate her vehicle or jewelry-making equipment? How?

3. John and Jane Smith tax issue:

a. Should John and Jane file separate or joint tax returns?

You Decide: It’s your turn as a tax professional to decide on the best course of action from a tax perspective on their issues as presented above.

For each issue, begin by restating the issue and numbering as shown above [i.e., 1(a), 1(b), etc.]. Next, explain and discuss the tax rules that apply to the issue, which you gleaned from your tax research. Then, conclude with a definitive answer to the issue, supported by citations to the sources used. So for each issue, you should

state the issue;

explain and discuss the applicable law (IRC sections, regulations, court decision, and so forth); and

present your answer in the form of a concluding paragraph that refers to specific language from the IRC sections, regulations, court decisions, and other sources (if applicable) to support the conclusion.

*A template has been provided in Doc Sharing for your use in preparing this activity. Please use it!


Citations are required. You must provide citations whenever you refer to the sources of tax law used in this memorandum. You may cite your sources in numbered footnotes, numbered endnotes, or in parentheses immediately after the sentence mentioning the cited source.

Grading Rubric






Content and subject: Easily identifiable, clear; meets or exceeds page or word-length requirement; all required citations are provided

Structure: Apparent, understandable, and applicable; excellent flow and well structured

Analysis: Interesting and novel; provides different perspectives; demonstrates critical thinking and critical analysis at a high level 

Mechanics: Virtually devoid of errors in grammar, syntax, punctuation, and spelling



Content and subject: Concrete overall, but may be slightly unclear; meets or exceeds page- or word-length requirement; some citations missing

Structure: Generally clear and appropriate

Analysis: Evidence relates to the content; evidence may lack some clarity; critical analysis and critical thinking apparent

Mechanics: Good sentence structure (syntax), grammar, punctuation, and spelling, with minor errors



Content and subject: Fairly easy to read and understand, but paper meanders from topic or lacks cohesion or content; meets page- or word-length requirement; missing most citations

Structure: Overall good, with minor shortfalls 

Analysis: Some critical thinking, but minimal or no analysis or further discussion by the adult learner

Mechanics: Sentence structure has some errors relative to syntax, grammar, punctuation, and spelling

Below Average

< 65

Content and subject: Often unstructured and vague; content not totally applicable to the paper’s requirements or introduces substantial material not relevant to the assignment and/or the relevant discussion points; no citations provided for tax law research 

Structure: Mostly unclear and difficult to visualize 

Analysis: Very limited with no analysis or further discussion by the adult learner that demonstrates adult learner critical thinking/analysis

Mechanics: Numerous mistakes in sentences, paragraph formatting, spelling, and grammar that subtract from the content of the paper; writing errors suggest minimal likelihood that paper was proofread for errors prior to submission; writing not at graduate level

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