You Decide Activity

Memo To:John & Jane Smith From: Date: [ 11/12/2011 ] Re:Memo summarizing various tax issues 1. John Smith’s tax issues: Issue a) How is the $300,000 treated for purposes of federal tax income? Applicable Law ; Analysis: Conclusion: Issue b) How is the $25,000 treated for purposes of federal tax income? Applicable Law ; Analysis: Conclusion: Issue c) What is your determination regarding reducing the taxable amount of income for both (a) and (b) above? Applicable Law ; Analysis: Conclusion: 2.

Jane Smith tax issues: Issue a) What are the different tax consequences between paying down the mortgage (debt) and assuming a new mortgage (debt) for federal income tax purposes? Applicable Law ; Analysis: Conclusion: Issue b) Can John and Jane Smith utilize a 1031 tax exchange to buy a more expensive house using additional money from John’s case? Applicable Law & Analysis: Conclusion: Issue c) Does Jane have a business or hobby? Why is this distinction important? Applicable Law & Analysis: Conclusion:

Issue d) Would Jane (and John) realize better tax benefits if she had a separate business for her jewelry-making activities? Applicable Law & Analysis: Conclusion: Issue e) What tax benefits would John realize if he invested $15,000 in Jane’s jewelry making? Applicable Law ; Analysis: Conclusion: Issue f) Can Jane depreciate her vehicle or jewelry-making equipment? How? Applicable Law ; Analysis: Conclusion: 3. John and Jane Smith tax issue: Issue a) Should John and Jane file separate or joint tax returns? Applicable Law ; Analysis: Conclusion: