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Intro
to Taxation
BUS
- A328 – Fall Term 2001
Research
Project
The "Research Project" will start with a factual situation that presents one or more tax-law questions. The ultimate goal is a written memorandum analyzing the issue(s) and presenting a conclusion about the proper tax treatment, based on found legal authorities.
The factual situation will be given in a "Problem Statement." That statement will give ALL of the objective information available. It will be followed by a general question similar to what a client would ask, e.g. "Is the money Jake spent for copper tubing deductible?"
All Submissions:
All papers submitted for this assignment MUST conform to the "Technical Specifications for Written Submissions". The DUE DATES for this assignment are shown on the current Schedule of Classes.
First ("interim") Submission:
The first ("interim") assignment is to submit two things:
(1) A statement of the legal issue or issues presented by the Problem Statement.
(2) Citations to relevant authorities relating to each identified issue.
The citations must include those IRC provisions that the student believes are relevant to analyzing/deciding the stated legal issues. They can also include citations to Regulations, court decisions, and other authorities. It is not absolutely necessary that one or more citations from each category be included. There may not be any relevant court decisions or "other authorities".
The citations in this submission (and all others) must conform to the citation format used in Chapter 16 of the course text. Not using the proper citation format is similar to putting journal entries somewhere in the middle of a year-end balance sheet.
Final Submission:
The second ("final") assignment is to submit a "file memorandum" discussing the question posed by the Problem Statement. In this context (and in many professional offices), a "file memorandum" is a complete, detailed discussion of the problem(s) posed. A file memorandum is not advocatory or argumentative; its primary purpose is to present the problem, review and discuss the applicable legal authorities, and reach a conclusion. Another professional who must correspond with the client or another professional should not have to go further than the file memorandum to be fully informed.
The "file memorandum" must include the following parts, in the order given:
Statement of Facts
Issue(s)
Analysis
Conclusion
Statement of Facts:
This part presents the problem facts. It is exceedingly rare that a client comes in with the facts and documents organized in a manner appropriate for a law memorandum. (Clients normally also do not come in with all the relevant facts, at least on the first visit.) Thus, this part of the memorandum should organize the received facts into an understandable scenario. That is most frequently chronological. If there are two or more independent streams of facts (e.g. Sam was doing things in New York during the same period that José was doing things in Phoenix) those streams should be stated separately - until they become intertwined. A good statement of facts tells a story. A series of "bullet" sentences or phrases does not tell a story. This must be a narrative, not a "PowerPoint"™ presentation.
No part of the memorandum can "add" facts, even if the additions are logical conclusions from the given facts. For example, if the given facts state that José did something in Phoenix on August 1 and then did something in Miami on August 2, it would not be appropriate to say "José flew from Phoenix to Miami." If the research shows that a pivotal fact is not known (i.e. not included in the given facts), the resulting discussion is part of the Analysis, not part of the Statement of Facts.
As with all other parts of the memorandum, the Statement of Facts cannot be put in final form until the other parts are at least in almost-final form. For example, it is impossible to know what facts are relevant to a legal issue before the legal issue is discovered. After the Issue and Analysis parts are drafted, one must go back to the Statement of Facts to make certain that all the relevant facts, and very few irrelevant facts, are included. If a fact is discussed in subsequent parts, it must be first revealed in the Statement of Facts.
Issues:
This part must be one or more questions – one question per issue. Issue-questions that include pivotal terms from, and reference to, the applicable legal rule are preferred. If the problem relates to an individual's possible deduction of home repair costs on her Schedule C, the issue question might be: "Is the cost of repairing residential sewer pipes deductible, in whole or in part, as a ‘home office expense' under IRC § 280A?"
In a tax-law memorandum, frequently the best issue-questions refer to the most precise, full IRC section that relates to the problem. For example, with the question in the preceding paragraph, it is best to refer to IRC § 280A, rather than IRC § 162 or IRC § 280A(c)(1)(B).
There may be sub-issues that have to be resolved to answer a stated issue question, but those should be identified (and discussed) in the Analysis part. Similarly, if the precise issue is addressed by only one small portion of the mentioned IRC section, that should also be included in the Analysis (at the beginning, with explanation).
In deciding what question(s) should be in the Issues part, one converts the question in the Problem Statement to a tax-law question. In the example about Jake, that might be something like: "Are costs incurred purchasing equipment for operating an unlicensed distillery deductible business expenses?" That general question, then, might be divided into two issues: (1) For federal income tax purposes, can a distillery business deduct the cost of still components? (2) Are "business expenses" of an illegal business deductible for federal income tax purposes? Those questions can then be rephrased in tax-law specific terms, e.g. "Are equipment costs deductible under IRC § 162?" The second one may be a little more difficult to rephrase.
Determining the precise legal question (issue) is more of a process than something that one does initially and then retains to the end. One must be familiar with the legal rules to know what the legal issue is. Therefore, the research usually starts with a more general question, which is refined as the research progresses.
Analysis:
An individual's personal opinion (even if the person is a U.S. Supreme Court justice) is neither authoritive or relevant when analyzing a tax-law problem. Throughout the Analysis, every statement about "what the law is" must be supported by a citation to a recognized authority (IRC section, Reg. section, court decision). Statements about what the result will (or should) be when the law is applied to a given fact situation should be supported by citation to authorities discussing analogous fact situations, with sufficient description of the authority to demonstrate its relevance. It is not absolutely necessary to cite an authority when one rephrases, or states purely logical conclusions from, previously cited authorities.
For example, with the question above about expenses of an illegal business, one must first determine if there are any IRC provisions that require expenses of an illegal business be treated any differently than expenses of a legal business. If not, are there any regulations, court decisions, etc., that discuss that (or a similar) question? If there is nothing that distinguishes between legal and illegal distillery businesses, then the answer to that question will be "yes". Of course, that conclusion must be supported by citation to relevant authorities. It is very dangerous to make a statement like "There are no IRC provisions, Regulations, or other authorities relevant to this issue." It is essentially impossible to thoroughly review every potential authority source – and as soon as one publicly states that something does not exist, someone else will find that something.
When the Issue questions are more general than the pivotal question, the opening part of the discussion narrows the discussion to the precise problem presented. For example, assume that the general IRC provision mentioned in the Issue contains four subparts that must be satisfied but there is no question that in the given circumstances the first two are satisfied. In the first paragraph, the first step is to identify the four subparts. Next, the two that are not in question are identified, showing why they are not in question, if the reasons are not totally obvious. The opening paragraph would then conclude with a statement that the two remaining subparts will be discussed.
It is essentially impossible to provide a specific outline that can be applied to every legal discussion/analysis. However, the first part of a legal-issue discussion should reduce the problem to the narrowest, most precise, question possible. (Of course, in that process, any authority that supports so narrowing the issue must be given.) Often the narrowest issue will be the meaning of a single word or phrase in the context of a given problem. The discussion of authorities then focuses on that narrow issue.
Since a file memorandum is not an advocatory document, it is essential that all authorities be discussed. The authorities that tend to favor one result should be balanced against those that favor a different result. While an effort must be made to predict which result is more likely in the given situation, it should not appear that there is only one possible result – unless, of course, all authorities unequivocally support that one result.
NOTE: In the instructor's opinion, the "Sample Research Memorandum" given in the course text (pp. 722 - 723) is grossly inadequate. For example, the "Reasoning" starts with the statement, "The general rule of Section 280A applies if. . . ." Unfortunately for the reader, no part of the memorandum states what that general rule is. The only person that might understand the sample memorandum is the person who wrote it or someone else with an equal or greater familiarity with the problem's facts and the relevant authorities. The discussion in the related "Comprehensive Research Example" (pp. 719 - 22) is somewhat less inadequate.
On the use of internal headings: It is important that any communication be written in a manner that makes it easy (or at least less difficult) for the reader to read and understand. Headings and sub-headings can be used for that purpose. By using different type styles or positioning, or both, headings and subheadings can make it much easier for the reader to understand where she or he is in the discussion and how the various parts of the discussion fit together. They can also be used to lessen the number of times and places the reader is informed about what has been, is being, or will be discussed; it often seems very condescending when that sort of thing is done repeatedly.