Write a tax research memo identifying the Relevant Facts, Issues Identified, Con

Question

Write a tax research memo identifying the Relevant Facts, Issues Identified, Conclusions, and Authorities and Reasoning for the tax problem listed below. Apply at least one relevant court case.

Write clearly and concisely so that the tax memo is no more than three pages. Use the APA style on margins, fonts, grammar, punctuation, writing skills, and spacing. Do not copy and paste the facts as listed below. You should include only the relevant facts and use your own words whenever possible.

Tax Problem:

Your client, Ray, was overly stressed and quit his job as a corporate executive. Rather than finding a new desk job, Ray decided he would devote his newly found free time to betting on horse races. Ray devoted a significant amount of time to studying the horses and race related information. In fact, he spent more than 60 hours each week on racing activities. Having previously worked as an executive, Ray kept very detailed accounts of his wagers, wins, and losses. In the prior year, Ray reported net winnings of $100,000 on bets of $113,000, thus resulting in a net gambling loss of $13,000 for the year.

Your manager has asked you to prepare a tax research memo indicating how Ray should report his gambling winnings and losses.

Explanation / Answer

Tax memo

From 31/12/2015

Reporting Wagers Winning and losses

Several rules applyfor the deductibitility of the gambler cost based on tax status of gambler as casual or professional. If gambler is professionsl than the activity can be considered as trade or business if it is done in good faith adn regulary to earn income.Gambling winnings are taxable.It is shown in tax schedule of individual.So Ray is doing it in professional manner by spending 60 hours in aweek and mainiting the detailed accounts and doing this activity after leaving the job. Sec 165(d) specifies that deduction losses from wagering transaction are limited to the gains from such transaction. So as the winnings is $100000 on bets out of $113000 so the deduction can be claimed upto the winnings i.e $100000. $13000 loss cannot be claimed as deduction.So $13000 cannot be carried forward too.

So conclusion is that the deduction of $100000 can be claimed as deduction in the return.

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