Accounting Question

Everything you need to know is in the files attached.

You do not need to do the contrast at the end of the paper. The two cases you will be working with are going to be in number 3

Welch v. Helvering, 12 AFTR 1456 (54 S. Ct. 8), and Harold L. Jenkins, TC Memo (1983-667)

Please follow the outline and required length for the paper.

P5
Spring
BRIEFING COURT CASES
Learning Objectives
At the end of this assignment, you will be able to:
• Brief a court case
• Understand the significance of facts
• Appreciate how subtle changes in facts can make a huge difference in the outcome of a legal
proceeding
Assignment
•
•
•
Read the Reading for P5 (Sample Brief) posted on Canvas.
Read “Common Errors in Tax Research” in the Resources on Canvas.
Prepare and submit case briefs according to the instructions below.
Instructions
Tax researchers have found that the preparation of a case brief—a concise summary of relevant
court case—is an invaluable tool, both when returning to a client’s research problem or when
constructing a research analysis for another client with a similar problem. You may work on this
assignment in pairs.
• Below are six pairs of court cases preceded by a group of letters. Select the cases that
correspond with the first letter of your last name. (You may use the letter for either partner if you
are working in pairs.) The cases citations below are not in the correct form. Be sure to look
at the Citation Forms document.
• Obtain the case opinions using RIA. Write a brief (1 ½ pages should be more than enough)
for each case and a one-page contrast of the two cases. (A sample brief is posted in the P5
assignment.) You will submit one Word document containing case #1 on the first page, case
#2 on the second page and the contrast on the third page. In comparing the cases, notice how
a subtle difference in the facts can completely alter the outcome. The third page of your
submission should focus on the differences in the cases and should be written as a narrative
rather than a numbered or bulleted list.
• Please submit the assignment (Case 1, Case 2 and Contrast) as a single Word document
attachment to Assignments by 10:00 p.m. on the due date (refer to the syllabus for the due date.)
If you are working in pairs, the team should turn in only one document with the names of both
team members included.
• Put your name in the header of your paper in this format: Last name—P5—A302 (or A551)—
spring 2024
1. (A-B) Oscar J. Hines, 72 T.C. 715, 718-719 (1979), and Jon L. Stolte, T.C. Memo 1999-271
2. (C) Everett W. Brizendine, TC Memo 1957-32 (1957), and Greta Starks, TC Memo 1966-134
3. (D-H) Welch v. Helvering, 12 AFTR 1456 (54 S. Ct. 8), and Harold L. Jenkins, TC Memo (1983-667)
4. (I-M) William T. Heywood, TC Memo 1994-575, and Donald C. Kimbrough, TC Memo (1988-185)
5. (N-V) Harold Dancer, 73 T.C. 1103 (1980) and Freedman v. Comm., 62-1 USTC 9400
6. (W-Z) Pevsner v. Comm., 46 AFTR 2d 80-5938 (CA-5), and Betsy Lusk Yeomans, 30 TC 757 (1958)
CASE BRIEFS
To understand the law with respect to a particular transaction, you must be able to read
and understand court decisions. Unfortunately, the law is not always the essence of
clarity. As a result, the courts are left with the job of trying to determine what the
legislature intended. Wading through page after page of a judge’s legal mumbo-jumbo to
determine how the law should be interpreted can be a difficult task. Nevertheless, it must
be done if you are to solve the client’s problem.
To ease the task, lawyers and tax professionals often find that the preparation of a short
one-page summary of a court case—a case brief—can be very helpful. A brief
summarizes the important points found when reading a case. In so doing, it helps one
focus on what is critical and relevant to the client’s problem.
The brief is a particularly useful reference when it comes time to write the file
memorandum and draw your conclusions. If you are working in a team, it enables teammembers to get the essence of a court case without necessarily reading the whole case.
A brief also saves time, particularly if you have to put the project aside and can only return
to it after some time has passed. In addition, it provides a significant part of the
documentation for your findings. Finally, it can help when constructing a research analysis
for another client.
 Note: The case briefs referred to here are not the same as the case briefs that are
required for most court hearings. Briefs prepared for a court hearing are normally not brief
at all—they are a detailed analysis of all parts of the litigant’s arguments. The briefs an
attorney may prepare for a court proceeding more closely resemble a file memorandum,
with a bit more formality. Also, it should be understood that most tax cases are not argued
Perry Mason style in front of a judge and jury. Often there is no jury, and the judge makes
a decision based on the briefs that the litigants submitted
The typical case brief presents in summary fashion, ideally not exceeding one page,
the citation, facts, issues, holding, and analysis of the case. Some writers add a final item:
relevance or why the case is important. If there is a dissent to the case, that is an added
element to the brief. Here is a short description of a brief’s elements.
Citation: Give the proper citation to the case. This is a full citation, including the name of
the case (the parties to the case), the year it was decided, and the court that decided it.
Include whether the case you are briefing affirms or reverses the lower court decision, if
any. Also give citations to the lower court decisions.
Facts: Briefly indicate the background that gave rise to the problem.
Issue: Concisely phrase, in the form of a question, the essential issue before the court. If
more than one issue is involved, there may be two or more questions.
Holding: Indicate here how the court held, that is, the court’s answer to the question
identified in the Issue section.
Analysis or Reasons for Holding: Summarize the reasons given by the court for its
decision and the case or statutory law relied on by the court in arriving at its decision.
Relevance: Relate the thrust of the court’s decision and how it relates to the client’s
problem. (You should not include a Revelance heading in the assigned briefs because
you do not have a client with a related problem.)
2
A sample case brief is shown next. Comments are hidden. Read the brief and see what
you think; then reveal the hidden comments (using the Tools/Options menu on Word).
This brief is a little longer than yours needs to be.
3
SAMPLE CASE BRIEF
CITATION
INDOPCO, Inc. v. Comm., 92-1 USTC ¶50,113 aff’g National Starch and Chemical Corp.,
90-2 USTC ¶50, 571 (CA-3, 1990)) [Start with name of case (italicized) with PROPER
cite; where is the citation to the trial court?]
FACTS:
In 1977, the Unilever Group approached National Starch and Chemical Corporation—
which subsequently changed its name to INDOPCO—about the possibility of a takeover
through a purchase of all of INDOPCO’s outstanding stock. INDOPCO’s board favored
the proposed transaction. However, it was advised by counsel that it should carry out its
fiduciary duty and ensure that the transaction would be fair to its shareholders.
Accordingly, INDOPCO’s board retained the services of Morgan Stanley, a big Wall Street
investment-banking firm [The use of “big Wall Street” is too casual, too colloquial,
too informal; a better choice would have been “an independent investment banking
firm.]. Morgan Stanley assisted in the valuation of. INDOPCO, rendered a fairness
opinion and did all of the due diligence required. For its work, INDOPCO paid Morgan
Stanley a fee of $2,200,000 along with $7,586 for out-of-pocket expenses and $18,000
for legal fees. In addition, the law firm advising INDOPCO charged it a fee of $490,000,
along with $15,069 for out-of-pocket expenses (a total of $505,069). INDOPCO also
incurred expenses aggregating $150,962 for miscellaneous fees, such as accounting,
printing, proxy solicitation and SEC fees for the transaction. On its federal tax return for
the year 1978, INDOPCO claimed a deduction for the $2,225,586 paid to Morgan Stanley
but did not deduct the $505,069 paid to its law firm or the other expenses. [Some might
say the numbers are not necessary but it does make the issue seem more important
and catches the reader’s attention—that is part of writing a good brief and file
memo.]The IRS disallowed the deduction. INDOPCO subsequently filed in the Tax Court
and asserted that not only were the investment banking fees deductible but also the legal
and miscellaneous expenses as well.
ISSUES: [As a practical matter there is generally one major issue and then other
sub-issues. Subissues should not be numbered separately—they are presented in
the analysis section. If there is only one major issue listed, it should not be
numbered. Also, the heading should be in singular form if there is only one issue.]
1. Are expenses such as legal fees, investment banking fees, SEC charges and other
expenses incurred during a friendly takeover currently deductible as an ordinary and
necessary business expense, or must the costs be capitalized?
2. Do expenditures have to create a separate and distinct asset before they must be
capitalized?
3. If the costs must be treated as a capital expenditure, may they be amortized over some
determinable period?
HOLDING: [There should be a numbered conclusion or holding for each numbered
issue.]
In a landmark decision, the Supreme Court ruled that expenses such as the investment
banking, legal fees, and other transaction costs were capital in nature and could not be
deducted currently as an ordinary and necessary business expense under §162(a).
According to the Court, the friendly takeover produced significant long-term benefits and,
therefore, the costs were capital expenditures. Moreover, the expenses could not be
amortized because their useful life could not be determined.
ANALYSIS:
4
The Court first explained that deductions are a matter of legislative grace and the burden
of proving that a deduction was allowed was on the taxpayer. [Probably unnecessary
to say since it is a fundamental rule in tax that a taxpayer is only entitled to
deductions that are authorized] It recognized the ongoing difficulty that exists in
distinguishing between a currently deductible expense and a capital expenditure. The
Court emphasized that “[A]lthough the mere presence of an incidental future benefit—
‘some future aspect’–may not warrant capitalization, a taxpayer’s realization of benefits
beyond the year in which the expenditure is incurred is undeniably important in
determining whether the appropriate tax treatment is immediate deduction or
capitalization.” INDOPCO argued that the decision in the case [unnecessary to say “in
the case” simply say “in Commissioner vs. Lincoln Savings) Commissioner v.
Lincoln Savings & Loan Assn., 71-1 USTC ¶9476 (USSC, 1971), indicated that a separate
and distinct asset must be created in order for a transaction to be capitalized. The Court
found that just because a separate and distinct asset is not created it does not follow that
the expenses are deductible. It may well be a sufficient but not a necessary part of the
classification. According to the Court, it was sufficient that the transaction produced
significant benefits beyond the current tax year and therefore the expenses must be
capitalized. The Court emphasized that INDOPCO all but admitted in company reports
that the transaction would produce long-term benefits.
The Court appears to believe that expenses that are incurred to change an organizational
structure are not ordinary and necessary business expenses on the theory that they are
for the future benefit of the company. [General Bancshares Corp. v. Commissioner, 64- 1
USTC ¶9220][poor cite: failed to italicize case name and did not give court or year
that case was heard]. It seems that the courts are convinced that acquisition-related
expenses closely resemble capital expenditures and do not qualify for deduction simply
because the expenditures do not create or enhance a separate and distinct additional
asset. Although INDOPCO argued that the future benefits were “entirely speculative” or
“merely incidental,” the evidence suggested otherwise. A 1978 report of INDOPCO’s
explained that it would “benefit greatly from the availability of Unilever’s enormous
resources…” In addition, Morgan Stanley noted in its fairness opinion that it believed “that
some synergy may exist with the Unilever organization…” The clear thrust of the decision
is to deny deductions and amortization of expenses that produce long-term benefits.
Only two citations of authority were included in the analysis. One to two more
citations would have made this brief stronger.
COMMON ERRORS IN TAX RESEARCH
Mistakes You Do Not Want to
Make
In reading a couple of million tax research papers, one finds there is no perfect approach to
either the research or the write-up. Below are some common mistakes in both the research
technique and the write-up. First of all, remember that there is no perfect approach.
Attorneys may take one approach while accountants might take another. In any event, the
following list provides some idea of the mistakes that you should try and avoid. It is by no
means complete nor are the items mentioned in any order of importance.
1. Identify the facts and state them up front. This statement of what the client has told
you regarding his or her situation provides the basis of your research. It tells what your
conclusions are based on. And, three years down the road when the client’s return is
audited and he says, “Well, I told you that,” you can point out exactly what facts he did
and did not convey. In your paper, the first section should simply be “FACTS.” A recent
paper began
In today’s complex world, the tax laws and regulations are highly technical and ever changing.
Individuals skilled in the knowledge of tax concepts are rewarded generously. One of the main
objectives why taxpayers seek professional consultations is for help on reducing their tax liability.
There are many ways for a taxpayer to reduce their tax liability.
While this opening statement might be suitable for a term paper on tax research for an
English course, it is not an appropriate start for a tax research memorandum that will be
read by your supervisor who has been practicing for several years. Remember your
audience.
2. Determine the issue and state it up front. This may require reading some background
material that provides you the necessary framework to understand the problem. A basic
text book is often a good starting point. In addition, the tax services provide some
background and their own editorial interpretations. However, do not cite secondary
resources in the file memo!
3. In beginning your research, start with the Internal Revenue Code rather than cases
or Regulations. State what the statute says about the issue. All answers to research
questions should be framed initially in terms of a Code section because the Code is the
ultimate authority. It is the bible!
4. Consider the Regulations after the Code. The authors of the Regulations tried to
anticipate problems that might arise in interpreting the basic statute. For an example,
consider the 150-hour requirement that must be met to sit for the CPA exam. The law
may say you must have an accounting concentration in order to take the CPA exam but
not give you any idea of what an accounting concentration is. The Regulations may in
fact say that it consists of 24 hours of accounting. Therefore, the Regulations often, but
not always, provide sufficient guidance regarding how the statute should be applied in a
particular situation.
5. Citing the Regulations. When citing the regulations, make sure to observe whether the
regulations are in final, temporary or proposed form. It is assumed they are in final form
unless it is stated that they are proposed or temporary. Imitate the text when citing a
regulation (e.g., Reg. Sec. 1.162-1(a)). Do not use the form shown in the tax services
or in court cases.
6. IRS Publications, Instructions to Forms, etc.
The rules found in these sources
normally derive from the regulations, previous rulings, or court cases to which the IRS
has acquiesced. When possible try and cite the original primary authority rather than the
instructions or publications. Your work is more authoritative when you cite the
regulations rather than an IRS publication. You may NOT cite IRS publications as your
source for papers written in this course. If you find an answer in a publication, you
must follow it up by finding and citing the regulation, ruling, or case that the writer of
the publication used as his or her source. Do not cite the publication!
7. Read the cases and rulings. The summaries of the cases and rulings provided by the tax
services give you an idea of whether they relate to your problem. To determine whether
they are truly on point and apply, you must read the full ruling or case. Cases typically
summarize all the history to date on a particular issue, and, therefore, provide tremendous
insight. You must read the cases in their entirety: the whole thing, yes, all of the
case. Reading the entire case will give you a sense of how your write-up should read.
Remember you are just a judge without a black robe! Read the footnotes as well. The
footnotes may give you important information.
8. In cases heard by the Tax Court, the petitioner is the taxpayer (because he or she
petitioned the Tax Court for it to hear his or her case) and the respondent is the IRS or
government. While the court may talk in these terms, you should use the terms
“taxpayer” and “the IRS” or “the government.” Don’t lose points over this error.
9. When reading a case, think of it as simply the story, the saga, of some poor taxpayer,
because that is indeed what it is. Reading a case is not like reading some Harlequin
romance novel, but it helps to imagine the situation of the taxpayer.
10. Always check current developments. Ensure that your research reflects the most recent
developments. The tax law changes daily. Hours of research may be overturned by one
recent case or development. Check to see if any court case on which you are relying was
appealed and, if so, whether the lower court’s decision was affirmed or reversed. With
the advent of Internet-based tax services, all of the information is generally updated
quickly. Note: A legislative change to a code provision may make a regulation issued
under prior law inapplicable to a later event, even if the Treasury Department has not
formally withdrawn the regulation. The tax services generally include a warning at the
top of the regulation. Further research then is required.
11. Provide sufficient facts when discussing important cases. In your write-up, you
normally are trying to develop a point based on some decision written by some judge.
Often it is difficult to appreciate the point you are trying to make without sufficient
information about the facts of the case. Tell a story. Failing to adequately discuss the
facts and provide the necessary background is like giving the punch line without the rest
of the joke!
12. Analyze, analyze, analyze in a logical and deductive manner. Focus on why the result
should be this way or that. Organize your thoughts. A chronological development of the
law and how it applies to your set of facts is normally the best approach. Normally it
doesn’t make sense to discuss a 1989 case first, then a 1970 case, and then jump back to
a 1990 case. Develop your thoughts in a logical manner.
13. State WHY the Court held as it did. Do not argue totally by analogy. It is generally
insufficient to simply say that your case is like Jones and, therefore, the result should be
this or that. Focus on the rationale used by the courts (i.e., judge) in a particular decision
and determine whether it applies in the situation that you are considering. Notice the
writing style, the approach used by the judges in writing up their decisions. Yours should
follow a similar pattern. Pretend you’re a judge and must communicate your findings to
the parties.
14. If you copy and paste a citation from in internet source, remove the hyperlinks.
15. State your answer in such a way that the criteria may be applied to other cases and so
that you can analyze it. What is the test?
16. Avoid one-sentence paragraphs. The first sentence should state the thought that the
paragraph will develop. The following sentences should expand that first statement by
explaining it, illustrating it or proving it.
17. Poor citations and poor form for citations. Cite a case, ruling, procedure and other
authoritative materials in the proper form. Do not cite RIA explanations because they
are not authority. A recent paper contained the following sentence relating to Section
280A concerning the home office deduction:
Paragraph 280A.156 of Sec. 280A concerns….
Wrong, wrong, wrong. There is no such paragraph in Section 280A of the Internal
Revenue Code. This is a reference to where the discussion appears in one of the tax
services. It would have been sufficient to simply say “Sec. 280A.”
Give the complete citation of cases, rulings, etc. Why? So you or your reader can find
them later. The proper citation form for each type of official pronouncement is given in
Chapter 2 of the text. Note the footnotes in your text. These footnotes are examples of
how the citations in your paper should appear. For example, here is a District Court case
with three cites
Cam F. Dowell Jr. v. U.S., 75-2 USTC ¶9819, 33 AFTR2d 74-739, 370 F.Supp. 69 (D.Ct. Tx.,
1974)
Note that the text gives three different cites to references for where U.S. District Court,
Court of Appeals, and Claims Court decisions may be found (see page 2-26).
The cite from the publishing firm of Commerce Clearing House (more commonly
referred to as the CCH cite) appears first (USTC for United States Tax Cases where
CCH publishes all of District Court, Appellate Court and Claims Court decisions). The
cites from the publishing firms of RIA (PH) and West Publishing follow. For this class,
when you cite a case, it is sufficient to give only one cite. Don’t forget the year of the
case or the court that issued the decision. Whenever citing a case, underline or italicize
the name of the case. The first time you mention a case give the full citation (e.g., J.R.
Ewing, 65 T.C. 889 (1981)). In referring to the case later it is normally unnecessary to
repeat the citation (e.g., in Ewing, the taxpayer… would be sufficient).
Do not footnote your references to rulings and cases but incorporate them in the body of
your paper.
18. State your authority. You aren’t an authority nor are the editors of RIA or some journal
article. Be sure and state the official authority (Code, Regulations, Rulings, cases, etc.,)
on which you based your conclusions and analysis. Often times students cite a paragraph
from RIA as authority: It is not authority!
19. Avoid writing in the first person (i.e., I, we). It is unnecessary to state that “I believe”
or “we think” in your paper. This is presumed because you are the author. Try instead,
“it seems or it appears” or some similar language. Avoid using the second person “you”
as well.
20. Make sure your writing makes sense. Act like a third grader. Have mom or dad or your
roommate or spouse or someone read your paper to see if they can understand the
message you are trying to communicate. If they can’t understand it, no one will.
21. Do not make yourself look stupid. Know the difference between there and their, to and
too and two, it’s and its. Watch out for spelling errors. Misspelling receive, separate, and
anything else in this day of spell checkers is unforgivable. Such mistakes make a bad
impression.
22. Focus on the relevant issues. If something doesn’t pertain to the issue, don’t discuss it.
Don’t add superfluous information for filler. One paper concerning the deductibility of
home office expenses of a teacher discussed the special home office rules concerning
day care that were completely irrelevant to the issue at hand. The same paper reviewed
how the amount of deduction would be determined even though there were no amounts
given in the case. Focus on the relevant issues.
23. Proofread. Proofread. Proofread. Do not be lazy and say that only one mistake won’t
hurt you. The reality is that there are probably other mistakes that you have failed to
catch. Correct all you can.
24. Ensure a smooth transition from one paragraph to another. Don’t say, “now that we’ve
covered the Code, it’s time to cover the Regulations.” This sounds like my
son when he was 10 years old–pretty sophomoric–and I think you’re older and wiser.
25. Observe the formal rules of writing. Do not use contractions. Spell out numbers where
appropriate. Do not spell out dollar amounts.
26. Remember who your audience is. Here is a quote from the conclusion of a recent paper:
“Going over all of the tax laws and regulations can be a very complicating task.” I know
the task is complicated (and not complicating). There is no need to tell me or the
supervisor that assigned you the job.
27. For what it’s worth, someone once said (Vince Lombardi, Casey Stengel, Thoreau,
Bevis…) Strive for perfection, in so doing you will achieve excellence.
THE FILE MEMO FOR YOUR MAJOR TAX RESEARCH CASE IS WORTH
60% OF YOUR GRADE. COMMUNICATION PLAYS A HUGE ROLE IN THE
GRADE THAT YOU RECEIVE FOR THIS CASE AND THE COURSE!!
PAY ATTENTION 
Citation Forms
INTERNAL REVENUE CODE
Section 170(a)(2)(B)
§ 170(a)(2)(B)
IRC § 170(a)(2)(B)
CITATION FORMS FOR REGULATIONS
Final:
Reg. § 1.162-1
Temporary:
Temp. Reg. § 1.469-2T
Proposed:
Prop. Reg. § 1.280A-1
IRS ADMINISTRATIVE RULINGS
Rev. Rul. 84-101, 1984-2 C.B. 115
Rev. Rul. 99-28, 1999-25 I.R.B. 6
Notice: Notice 97-60, 1997-46 I.R.B. 8
Letter Ruling (PLR) 9409003 (2/26/93)
Technical Advice Memo (TAM) 199932013
CASES
The first reference to a case within your tax memo must be properly cited. Subsequent references do not include
a complete citation. For example, you might write: “This issue was addressed in Louis Allen, 2 B.T.A. 1313
(1925). In Allen, the taxpayer…”
BOARD OF TAX APPEALS (PREDECESSOR TO TAX COURT)
Louis Allen, 2 B.T.A. 1313 (1925)
TAX COURT REGULAR DECISION
W.W. Windle Co., 65 T.C. 694 (1976) (NO NEED TO PUT V. COMM)
Temporary cite: W.W. Windle Co., 65 T.C.
, No. 79 (1976)
TAX COURT MEMORANDUM DECISION
CCH: Alan K. Minor, 60 TCM 435 (1990)
RIA: Alan K. Minor, T.C. Memo 1990-418
DISTRICT COURT DECISIONS (include lower court decisions noting aff’g. or rev’g.)
CCH: Cam F. Dowell, Jr. v. U.S., 74-1 USTC ¶9423, (D.Ct. TX., 1974)
RIA: Cam F. Dowell, Jr. v. U.S., 33 AFTR2d 74-739, (D.Ct. TX., 1974)
West: Cam F. Dowell, Jr. v. U.S., 370 F.Supp. 69 (D.Ct. TX., 1974)
APPELLATE COURT DECISIONS (include lower court decisions noting aff’g. or rev’g.)
West: Lewis A. Merryman, 873 F.2d 879 (CA-5, 1989), aff’g T.C. Memo 1988-72
RIA: Lewis A. Merryman 64 AFTR 2d 89-5009 (CA-5, 1989)
CCH: Lewis A. Merryman 89-1 USTC ¶9338 (CA-5, 1989)
SUPREME COURT DECISIONS (include lower court decisions noting aff’g. or rev’g.)
West: Fausner v. Comm., 413 U.S. 838 (USSC, 1973)
CCH: Fausner v. Comm., 73-2 USTC ¶9515, (USSC, 1973)
RIA: Fausner v. Comm., 32 AFTR2d 73-5202, (USSC, 1973)