Our client Mr. Kid Masterson works full-time as a manager for a federal government agency. His employment requires that he go to an office Monday through Friday for about eight hours each day. His employment does not require him to work nights or weekends. He earns a salary of about $65,000 annually and is single with no children.On most weekends, Mr. Masterson drives to casinos and spends the weekend gambling. While at the casinos, he prefers the table games and enjoys playing blackjack, roulette and baccarat. Mr. Masterson adds that he probably enjoys gambling more than any other activity in which he engages. Since he is a regular at certain casinos, he has made friends with some of the other regulars, and he and his friends sometimes share gambling tips with each other.Mr. Masterson has asked us to complete his 2014 federal income tax return and he further instructed our firm to include a Schedule C, Profit or Loss from Business, in the return. Mr. Masterson penciled in a Schedule C with the information he wants us to include on the actual tax return. On the Schedule C, Mr. Masterson listed his principal business as that of professional gambler. He indicated that he used the cash method of accounting, and that he materially participated in this business activity during 2014. Under Income, Mr. Masterson indicated gross receipts of $2,500. On line 27a, Other Expenses, Mr. Masterson listed gambling losses of $19,500. As a result, his Schedule C showed a net loss of $17,000. Mr. Masterson has kept no detailed records of his gambling winnings or losses, but he feels strongly that he has provided us with accurate information.The partner of our firm who supervises tax return preparation, wants you to use RIA Checkpoint software to research the proper tax treatment of the gambling income and losses. She would like to see some tax law sources which discuss who qualifies as a professional gambler, proper reporting of income and losses from gambling activities, and how those amounts should be substantiated. She would like for you to communicate your findings in a professional tax memo.Please follow the example memo provided on page 2-21 of your textbook.Start your research using the Federal Tax Coordinator 2d in RIA Checkpoint. 1. Click on the Table of Contents tab at top left of the screen. 2. Click on the box with the plus sign to the left of Federal Library. 3. Click on the box with the plus sign to the left of Federal Editorial Materials. What is the first item in the list under Federal Editorial Materials? 4. Click on Federal Tax Coordinator 2d. 5. In the search box at the top type: professional gambler business loss records. 6. Click in the box next to Federal Tax Coordinator 2d. Then click the Search button at the top of the screen. 7. You should now see the number 100 listed next to Federal Tax Coordinator 2d. There are one hundred items which contain your keywords within the Federal Tax Coordinator. Click on the (100). 8. Read through the titles and look for something that appears to be relevant to our case. Click on the link to L-1116. Notice the title of the paragraph. Read through the discussion. Your keywords should be highlighted in yellow. Look for a taxpayer scenario that sounds similar to our clients situation. Click on footnote 3.5, and then click on TC Memo 2015-128. 9. RIA will then open the case for you, and you can read the courts opinion for this case. Read through the case and see if you can find the Internal Revenue Code Section relevant to our issue. Also, does this case support our clients position?Your memo should contain the following sections: Date, Preparer, Subject, Facts, Issue, Authorities, Conclusion, and Analysis.In your Authorities, you should cite one (1) Internal Revenue Code Section, (2) one Tax Court case, and (3) one Regulation. Please discuss each of your relevant authorities in the Analysis section of your research memo.The memo must be typed, double-spaced, with margins no greater than one inch each. It should be of adequate length to include all the sections listed above, and it should be of adequate length to support your position on the clients issue.You must submit the assignment as an attached Word document file.
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