DeVry ACCT 429 TAX RESEARCH MEMORANDUM ASSIGNMENT 1 and 2 Week 3 Research Project assignment Answer

TAX RESEARCH MEMORANDUM ASSIGNMENT 1
Week 3 Research Project (Set #1)
DeVry University Acct 429
One of your clients is an incorporated funeral home, Peaceful Pastures Funeral Home, Inc.
(“Peaceful”). Peaceful, an accrual basis taxpayer, provides a full line of funeral services and sells goods related to those services. Over the last few years, however, the cost of these goods and services have risen dramatically. As a result, more of Peaceful’s customers have had difficulties paying their bills or have selected goods and services that cost less, sharply impacting Peaceful’s bottom line.
As a result, Peaceful has attempted to design an approach that allows customers to prepay for
their funeral goods and services. Under this program, the customer pays in advance for the
goods and services that will be provided at the time of their death, often at a significant
discount. Under the terms of the contract, the payments are refundable at the contract
purchaser’s request any time until the goods and services are provided to them. Given that it is an accrual basis taxpayer, Peaceful has included these payments and income for the year the funeral service is provided.
This year, the IRS sent Peaceful an audit notice. It contends that the amount prepaid under
Peaceful’s program constitutes prepaid income that must be included in Peaceful’s income (and therefore subject to tax) in the year in which it is received. Peaceful has come to you for
advice. Is the IRS correct?

COMPOSE A TAX FILE MEMORANDUM CONCERNING THIS ISSUE USING THESE FACTS AND THE RESEARCH MATERIALS PROVIDED TO YOU IN THE NEXT FEW PAGES (30 POINTS).

TAX RESEARCH MEMORANDUM ASSIGNMENT 2
Week 3 Research Project (Set #1)
DeVry University Acct 429
MegaCorp, Inc. purchased all of the assets of Little, Inc. As part of this acquisition, MegaCorp also acquired some of Little’s liabilities. In particular, Little was involved in a particularly nasty patent infringement case whereby another company (Ideas, Inc.) was alleging that Little had violated its patents and, therefore, owed that company a substantial amount of money. MegaCorp agreed that it would be legally responsible for any judgment that Little would have to pay Ideas in the lawsuit. As part of this process, the opinions of various experts determined that the likelihood that a significant contingent liability would arise from this obligation was quite remote (between 0% and 5%).
Unfortunately for MegaCorp, a jury disagreed. After hearing evidence in the case, the jury
concluded that Little did indeed infringe Ideas’ patent and awarded Ideas $5 million in
damages. As agreed, MegaCorp paid Ideas the $5 million judgment and deducted this
payment as an ordinary and necessary business expense under § 162. Upon audit, the IRS has disagreed with this characterization. The IRS reclassified the $5 million payment as a capital expenditure under § 263 and disallow the deduction. MegaCorp has come to you for advice. Is the IRS correct, or is MegaCorp entitled to the deduction?

COMPOSE A TAX FILE MEMORANDUM CONCERNING THIS ISSUE USING THESE FACTS AND THE RESEARCH MATERIALS PROVIDED TO YOU IN THE NEXT FEW PAGES (30 POINTS).

RESEARCH ESSAY ASSIGNMENT 1
Week 3 Research Project (Set #1)
DeVry University Acct 429
As we covered in Weeks 2 and 3, the passive loss limitation rules impose real limitations on the ability of owners of certain types of ventures to take losses from those ventures and use them to reduce other income. That hardly means, however, that people don’t try. One such area often involves various oil and gas ventures. Often operated as publicly traded partnerships, sophisticated investors often purchase limited partnership interests in these ventures. They are, however, subject to a particularlyrestrictive set of passive loss limitation rules. Locate at least three such oil and gas publicly traded partnerships on the web that are marketed to new investors. Describe the benefits that the promoters of each of these partnerships claim will result from the investments and describe the disclaimers, if any, that they provide detailing what limitations may be placed on the losses.
NOTE: You must either (1) submit complete citations to these online resources so that your
instructor may find these studies online or (2) submit complete copies of these online
resources with your submission. Failure to do so will result in a zero for the assignment.
PLEASE RESEARCH THIS ISSUE ON THE INTERNET AND COMPOSE AN ESSAY INCLUDING YOUR ANALYSIS OF THE ISSUE (20 POINTS).

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DeVry ACCT 429 TAX RESEARCH MEMORANDUM ASSIGNMENT 1 and 2 Week 3 Research Project assignment Answer