Cory and Matt

Memo Format

Facts:

Cory and Matt are equal members in Capri, LLC. Capri, LLC purchased equipment subject to a lease. Capri also partially financed equipment purchased using promissory notes. Part of the notes were recourse, the remaining were nonrecourse. Neither Cory nor Matt signed any of the notes or otherwise guaranteed repayment of the notes. In addition, Capri, LLC owns the building in which their business is located, subject to a mortgage. Cory and Matt personally guaranteed the mortgage.

In 2017, Capri LLC reported a very large loss.

The LLC operating agreement contained the following provision:

If any Member has a deficit Capital Account following the liquidation of his, her or its interest in the LLC then he, she or it shall restore the amount of such deficit balance to the LLC by the end of such taxable year or, if later, within 90 days after the date of such liquidation, for payment to creditors or distribution to Members with positive capital account balances.

On his 2017 individual tax return, Matt took into account the leases, the promissory notes and the mortgage in calculating his amount at-risk, allowing him to report his entire portion of the LLC loss. In November, 2018, the IRS audited Matt’s 2017 tax return and disallowed all of the loss, claiming that Matt was not at-risk for any of the debt.

Questions Presented or Issue : ????

On his 2017 individual tax return, Matt took into account the leases, the promissory notes and the mortgage in calculating his amount at-risk, allowing him to report his entire portion of the LLC loss. In November, 2018, the IRS audited Matt’s 2017 tax return and disallowed all of the loss, claiming that Matt was not at-risk for any of the debt.

Matt has now come to you as his accountant to refute the IRS’ position.

Short Answer: ?????

Analysis:?????

Instructions

Research using IRA Checkpoint or other IRS Code references (Primary resources only). No articles please.

Focusing on the research problem, prepare an effective and efficient tax research memorandum providing a thorough analysis of the issue, facts, and authoritative rule, statement, or regulation to determine an appropriate conclusion.

Part 1

The analysis is the substantive portion of your memorandum and is worth the majority of the points on the assignment. It is where you present all of the analysis that is required to support your conclusion. Once you have identified the issue or issues that you have to resolve to answer, you will need to perform tax research to identify tax authorities to establish the controlling “rule” that resolves those issues. Your analysis for each of these issues should review these authorities and then apply them to the facts of the case to draw conclusions.
Apply the “IRAC” method or format for research papers.
The memo should be 2-3 pages, double-spaced, size 12 font.

Part 2

Please develop an argument for both the accountant for Capri, LLC. and one for the IRS agent and her manager. So, there should be two separate arguments. 1 page for both arguments
The IRS agent is adamant that all the losses should be disallowed. Capri, LLC has discussed this with their outside accountant and wishes to dispute that finding. Therefore, they have requested a conference with the IRS agent and her manager to further discuss the issues.

Note : Please follow exactly. If you have any questions, please contact me immediately. This is the second attempt, I got a zero previously and given the option to re-do. I am just swamped with other assignments at this time. Your assistance is greatly appreciated.