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ACCT 5135

RESEARCH ASSIGNMENT #2
(Spring 2016)
This Research Assignment #2 is worth 20 points toward your final grade and has multiple parts. It
is very similar in format and purpose as your first assignment, but the focus here is primarily
directed at the use of a topical service specifically Tax Management Portfolios. Another part of
this Assignment will also make sure everyone is aware of the resources available on the IRS web
site.
As with Assignment #1, you are encouraged to work in groups (which usually makes the research
easier and more "fun"). If you do work in groups, each member of the group must participate fully
and make a significant contribution to each question. It is not acceptable to split the assignment into
parts for each member to complete. If you work in a group you need only turn in one answer sheet
but make sure the names of all members are clearly identified in alphabetical order by last name..
The answers need not be typed but must be clearly legible on a separate sheet. There is no need to
attach your research or to write long answers -- just answer the question as succinctly as
possible!
As in the first assignment no single question should take more than 10 minutes. There are some
cheat sheet hints at the end of the assignment on some of the more difficult problems if you are
having trouble. If you are having difficulty after due diligence, skip it and email my teaching
assistant (Joseph Birkett [birke070@umn.edu) or see him when he is in the CSOM lab in L-112
(hours will be announced in class and posted on Moodle).
Part I: Introduction To Tax Management Portfolios
Tax Management Portfolio Series, published by the Bureau of National Affairs, is one of the tax
practitioners most useful secondary resources. The advantage of a "topical" tax resource is that
tax research is often topic driven. Tax Management Portfolios will explain a topic (much like a
textbook), and will cite primary authority as part of its explanations. There are several other wellknown topical tax services, but TMPs has always enjoyed being considered the gold standard.
The link is: https://www.lib.umn.edu/libdata/page.phtml?page_id=4911. I have also provided a
link on the course Moodle page for your convenience. Once you are linked you want to click:
Bloomberg BNA Tax and Accounting Center (first link below the Table of Contents). You will
see the portfolios in the middle column. We will only be using the U.S. Income Series. Note
there are training materials if you click on the getting started tab on the top toolbar.
One deficiency of these exercises is that students usually use the portfolios for a general
discussion of an area of tax rather than for a specific narrow fact pattern where CCH
Intelliconnect (used in Assignment 1) may be more efficient. However, for purposes of learning
how to use the portfolios and to get answers that can be checked more specific questions must be
asked. Take some time as you go through these exercises to appreciate how useful the portfolios
can be in researching general topics and getting an overview of almost all areas of federal

income tax.
There are two primary methods to search the portfolios. The first is browsing and reading. This
is similar to looking through the table of contents of a portfolio in the paper version. Once you click
on U.S. Income Portfolios there will be 10 general categories (Income Tax Accounting, C
Corporations, etc.). The idea is to click on the relevant general category and then keep expanding a
category using the + next to a category to find an answer. Lets use the browsing and reading
method to answer the following questions:
Question 1: Assume you are doing research and find a tax case that is helpful. When you
look at the citation though it turns out it is from the federal bankruptcy court in Minnesota.
Although not discussed in class, it is possible for a bankruptcy court to hear a tax matter if the
taxpayer is in bankruptcy. But now you are wondering whether you can cite this case as authority or
not. Does it have any precedential value? There is a cheat sheet if you are having trouble after
five minutes or so.
Question 2: One fringe benefit we discussed briefly in class is employer provided
educational assistance plans. This generally allows employees to exclude up to $5,250/year from
income for employer paid higher education benefits such as tuition, books and supplies. Assume
the employer also pays for transportation expenses such as parking when you go to classes. Would
this amount be qualified for exclusion? Just need a yes or no and citation to authority. (Yes, there is
a cheat sheet hint if necessary)
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The second primary method of getting around is searching. The search bar is in the upper right of
the screen. Note that if all you want to search are the portfolios (rather than include source material)
then first click on the U.S. Income Portfolios link before you do your keyword search. You can
always include primary source material by clicking the all choice rather than this collection
which should be the default.
Although the key word connectors are essentially the same as discussed with CCH (near/w, /s, /p are
close see under advance search at the bottom of the page), the topical search will bring you to
totally different material. Remember using a topical service will generally be better if you are
looking for an overview or explanation of an area vs. trying to find a particular authority. Lets use
this method to answer the following two questions:
Question 3: A client calls who intends to give a valuable customer an expensive
holiday gift. However she had heard that she would not be able to deduct the full value of such a
business gift. She is indignant since she feels this is just a normal business expense. What is the
limit, if any, on business gifts and cite the applicable authority.
Hint 1:
Once you have the right key word search (not hard here!), youll have a
number of hits. You can view the hits either by expanding a category (using the + as we just did
above) or sorting by relevance under show results. In this case one is easier than another
(depending on your key word search), but not always!

Question 4: Your corporation is considering building an athletic facility on its premises


that will be used solely by its employees and their families. The tax director has asked you
whether the value of such facility has to be included in the employees incomes. Does it, and cite
your authority?
Hint 2:
There is a go to hit link at the top of the page once you are into a particular
portfolio that is often useful in quickly going to your keywords. So often can begin after a key word
search by asking to sort by relevance and then after clicking on the portfolio use the go to hit
link to navigate quickly to an answer.
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It should be noted that BNAs library has expanded over the years to include much more
than just the portfolios. If you search using the all option you will see that you can search across
all portfolio series (to which you subscribe) as well as primary and other IRS authority. There is
even news and commentary. Consequently it is not all that much different from CCH except the
topical service is vastly superior to anything else on the market when researching by topic.
Question 5: A number of states, such as California, legally allow the purchase of pot so
long as they have a medical prescription that it is being used for medical purposes. Find out
whether the IRS would allow such purchases to be deducted as a medical expense. All you need is a
yes or no and a citation to authority.
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You can also use what is essentially a paper index. These indexes are organized either by
keyword or Code section. The easiest way is to click on keyword or IRC next to U.S.
Income Portfolios on the main federal page. Now choose a word to search based on the
following question:
Question 6: Lets assume you want to know when a race track is required to withhold on
amounts won from gambling on horse racing. What is the amount that triggers withholding on
horse racing?
Part II: Find these answers using Tax Management Portfolios On the Web
In order to become an efficient researcher students need to learn not only what resources may be
best for a particular problem, but also the different ways to use the resources. So keep in mind
that key word searches may not always be the easiest way to find the answers!
Question 7: A client had a lot of money in a bank that ended up being declared
insolvent due to embezzlement by one of its employees. The depositors loss was not fully
covered by federal deposit insurance. The client wants to know how the loss should be reflected
on his return. Some possibilities you think of is taking a deduction as a theft loss under Section
165(c)(3) or as a nonbusiness bad debt under Section 166. Find the Revenue Ruling that

addresses this issue.


Question 8: Remember back in Assignment #1 you found Revenue Ruling 87-41,
which dealt with the 20 factors the IRS uses to determine whether someone should be considered
an employee or an independent contractor. According to Tax Management Portfolios, what is the
critical factor in determining whether a consultant is an independent contractor or not?
Part III: IRS Homepage
There are a large number of other places within the WWW that contain tax materials. But clearly
the most useful free sites are those maintained by the government, specifically the IRS and the
various state authorities. Since the focus in this class is on federal tax, well only look at the IRS
homepage (http://www.irs.gov/).
One of the best uses of the IRS homepage is to find and copy tax forms. You can also
read/download IRS publications. Go to the IRS homepage and answer the following questions:
Question 9: Assume you moved last year and want to know both what expenses you can
take and any form you would need to fill out with your tax return.
A.
B.

What is the IRS Publication that discusses moving expenses?


What is the IRS Form number that must be filed to report moving expenses?

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The IRS also has a separate section in its web site dedicated to tax professionals (top
toolbar). This area has a wealth of helpful information. One good resource that we talked about in
class is Circular 230, which governs practice before the IRS.
Question 10: When a client requests that a practitioner return all its records, may the
practitioner keep a copies of such records? Just state a yes or no answer along with the section (and
any subheading) you would cite from Circular 230.

Cheat Sheet Hints (only look at if youre stuck or after you found the answer)
Question 1: This is a procedure issue. Just find the right portfolio that discusses different legal
authority including bankruptcy courts. Just cut and paste the key wording. Simple!
Question 2: This is a compensation issue and there is a portfolio that deals exclusively with
employee fringe benefits.
Questions 2-4: Just looking for a Code section (with subsections) for all three of these questions!
Be exact on your Code citation (and cite subsections if necessary to be clear).
Question 5: First of all you can keep this search extremely easy by using just the word
marijuana since this is not a word that is likely to come up in many tax authorities. (Note I used a
slang. Also you have to spell marijuana correctly!). Looking at titles, which portfolio most likely
would have the answer? Use the go to hit link for the portfolios since only used one key word.
Remember you are looking for an IRS position.
Question 6: Assuming you have selected the best key word, then just expand to pull up a replica
of a paper index. Find your subcategory and link until you find the answer
Question 7: Note this one is a little harder just because we havent covered these Code sections
yet (but we will!). Always easier to do research when you understand the issue better. But just play
around with the keywords and use good Boolean searches and you should find the relevant Ruling.
Question 8: Try a guided search with both a citation and a key word. Go to Guided Search,
(upper right), then check off U.S. Portfolios. Then further down plug in the logical citation from
the drop down selections (where Tax Code is the default).. Add the logical key word below. Now
expand logically.
Question 9: The key word search (upper right) on the IRS web site uses the same connectors as
other resources. You can narrow your search by first going to Forms and Publications before doing
the key word search.
Question 10: From the Tax Pros section find a link under Preparer Guidelines which will lead
you to a link to Circular 230. Once you have pulled up Circular 230 you can click on the binocular
icon to begin a key word search (see far left toolbar). Alternatively you can use the Table of
Contents.