You are a CPA working for ODU Alumni CPAs, LLP. Yesterday, you attended a Columbus Crew soccer match with a client who posed a question to you. The facts are as follows: Your client, Molly Dunphy, just got her realtor’s license. She has been talking to other reattors in the area who have shared with her that since her image is part of her job, she can deduct the following as business expenses on her Schedule C against her commission income from home sales: • Business suits worn only for work and kept in a separate area in her home • Dry cleaning of her business suits – Jewelry worn only for work • Makeup • Haircuts • Manicures • Teeth whitening • Personal trainer • Continuing education classes to maintain realtor’s license • Mileage from office to houses that are being shown and back (but not commuting mileage from Molly’s home to the office and back) Molly is not sure if this is correct, but her new colleagues state they deduct these items every year because these are all ordinary and necessary expenses of being a realtor. Molly wants to file her taxes correctly. What do you advise?
1. Draft a tax memo outlining the deductibility of the items listed on Molly’s Schedule C, where she reports her commission income as a realtor. Follow Exhibit 2-9, Sample Internal Research Memo, in your textbook on page 2-21. Use at least one Internal Revenue Code section and at least one tax court case in your analysis (and list all sources used in the authorities section).
2. Draft a letter to Molly Dunphy summarizing your conclusions with respect to the items listed above. Follow Exhibit 2-10, Sample Client Letter, in your textbook on page 2-22
COURSE MATERIALS (REQUIRED) Spilker, Brian; Ayers, Benjamin; Barrick, John; Outslay, Edmund; Robinson, John; Weaver, Connie; Worsham, Ron, Taxation of Individuals and Business Entities, 2019 Edition, McGraw-IiiIVIrwin, New York, NY, 2019. ISBN# 978-1-259-91839-1
