Two Issues that need to be addressed in IRAC Format referencing the below case study.

1. Research criminal tax fraud literature related to Debbie’s tax issues.
Prepare a tax research memorandum regarding anti-tax fraud laws and be
prepared to defend your decision for a meeting you plan to have with the senior
partner.

2. Research Exemption Prepare a tax research memorandum examining whether Debbie or her ex-husband Donald can claim Sally and Sam an exemptions.

Format
APA Format and state each research using the method;
Issue
Rule
Application
Conclusion
Research needs to be supported using primary authority list noted below:

To the extent possible, please support your research with appropriate legal citations that
Refer to primary authority as shown in the listed below.
There are three types of primary authoritative documents:
1. Statutory
a. Internal Revenue Code
b. Tax legislative process
2. Administrative
a. Treasury regulations
b. Revenue rulings
c. Revenue procedures
d. Private letter rulings
e. General counsel memorandums
f. Internal revenue manual
3. Judicial.
a. Tax court
b. U.S. District Court
c. U.S. Claims Court
d. U.S. Circuit Court of Appeals
e. U.S. Court of Appeals for the Federal Circuit
f. U.S. Supreme Court
g. Actions on decisions

Apply the IRAC method and research the two issues noted above in regards to the below case:

Case study
As the newest member on the tax department team, the senior partner assigns you to
conduct tax research for Jerome Horowitz (nickname: Jerry), a client who has been with
the firm for many years. You will need to research various tax issues the client confronts
given activities that occurred over the past 5 years. Unfortunately, the firm does not have
copies of Jerry Horowitz’s tax documents from prior years.
Jerry Horowitz, is a divorced man, decided to take the plunge and get married one more
time. Before he tied the knot this time, he wanted to protect his personal assets and
individual wealth. Jerry was hesitant to bring up the subject of a prenuptial agreement to
his fiancée Debra Francois (nickname: Debbie). To sweeten the upcoming awkward
discussion, he surprised Debbie by having roses delivered to her office one Friday
afternoon. Debbie was gleeful the rest of the workday as her co-workers admired and
made jovial comments about her marrying the best catch in town; Jerry was handsome,
from a wealthy family, and known for his daredevil bungee jumping hobby. Rumor has it
that Jerry has made millions working for JPM Real Estate Company. After work, Jerry
took her to dinner at one of the finest restaurants downtown.
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Knowing the Internal Revenue Service (IRS) has audited Debbie multiple times; Jerry
hired a tax attorney to write the prenuptial agreement. Aaron Levine, Esq. was highly
respected in the community and had the reputation of being the best tax attorney around.
Levine prepared an equitable and fair prenuptial agreement to protect the respective
assets of both Jerry and Debbie in the case of divorce or death. Jerry was substantially
older than Debbie and was most concerned about leaving all real property to his grown
children upon his death. Debbie would receive the proceeds from a one million dollar life
insurance policy if Jerry passed away first.
After cocktails and dinner, Jerry garnered the courage to discuss the prenuptial agreement
with Debbie. Fortunately, Debbie was a fair-minded woman and completely understood
that her past dealings with the IRS could be an issue moving forward. Both Jerry and
Debbie agreed they wanted to use the “married filing joint” status on their future income
tax returns. She was glad Jerry had taken care of having Levine prepare the prenuptial
agreement, which she agreed to sign at Levine’s office that night.
On December 31, 20X5, Jerry and Debbie had a fabulous wedding ceremony overlooking
the turquoise waters of the Caribbean. They took a honeymoon by cruising from St.
Thomas, in the U.S. Virgin Islands to Jamaica and back on a 95-foot sloop. The weather,
food, and crew provided a dream come true honeymoon. Debbie was ecstatic!
Before marrying Jerry, Debbie had been married to an outside salesperson named Donald
Draper; they had two children, Sally and Sam. He pushed the envelope a little too far
when it came to deducting the entertainment and travel costs associated with his job.
Draper did not keep accurate records or save receipts associated with business travel
expenses. Like Debbie, he too had trouble with the IRS. Specifically, the IRS claimed that
Donald was not keeping accurate business or tax records and even more incriminating, he
was fabricating travel and entertainment expenses. Since Donald and Debbie selected
the “married filing jointly” status on their 20X1 and 20X2 tax returns, the IRS indicted both
Donald and Debbie on criminal tax fraud. Debbie was unaware that Donald was fabricating
expenses on their jointly filed tax return. Unfortunately, the new bride continued to be
under investigation by the IRS even after her tropical honeymoon.
Imagine the surprised look on Debbie’s face when Jerry received a letter from the IRS
dated January 8, 20X5, stating the IRS is auditing him for tax years 1989 and 1999.
Unaware he too had IRS problems, Debbie felt even more relieved she had signed the
prenuptial agreement. Jerry manages JPM Real Estate Company, Inc. where he earns a
very nice salary, which he reported on his personal income tax return. Sometimes, Jerry
sold a few properties as an independent real estate agent. When he remembered, he
reported these commissioned earnings on Schedule C of his tax return. The IRS letter
asserted that Jerry understated his gross income 26% and 31% for the 1989 and 1999 tax
years respectively.
Jerry always had a passion for jumping off high objects since he was a toddler, thus it was
no surprise when he started a bungee jumping business about 5 years ago, which he
named Jerry’s Jiant Jumps Company. He never filed any official paperwork for the
company since it started out as a hobby. Given his upcoming audit, Jerry decided to clean
up as much of his sloppy business practices as possible. Therefore, he began the online
application process for an IRS Employer Identification Number (EIN). The application
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required the business address: 1858 Bungee Drop Lane, Terrapin Falls, MD 20783 and
Jerry’s social security number 100-00-0001. Jerry did not intend to put Debbie’s name or
social security number 100-00-0002, on the application since he owned 100% of the
company. Jerry was certain he was using a cash basis accounting method but unsure of
which business form to select on the EIN application, so he could not finalize the EIN
application process. Wisely, Jerry decided it was time for an accountant’s perspective.
At the beginning of February, Jerry came to the CPA firm with a box of tax documents and
a list of questions. Jerry’s previous accountant had retired from the firm, so it was no
surprise when a senior partner introduced the two of you and assigned you as Jerry’s new
accountant.
In your role as Jerry’s accountant, your first step is to conduct tax research to answer all of
his questions and provide Jerry with much needed guidance regarding his upcoming audit
useful sites
include: FindLaw.com and CornellLaw.com.