Tax Research Memo

Donald Mustard was a professional gambler, or at least, he gambled a lot. His venue of choice was horse racing. He gambled at tracks in Florida and Colorado. He went to the track 6 days a week for 48 weeks in 2018. He spent a substantial amount of time studying racing forms, programs, and other materials. He devoted from 60 to 80 hours each week to these gambling-related endeavors. He never placed bets on behalf of any other person, or sold tips, or collected commissions for placing bets, or functioned as a bookmaker. He gambled solely for his own account. He had no other profession or type of employment. Donald managed to win $120,000 in 2018 from his gambling endeavors. Unfortunately, he also lost $121,000.  As part of his professional gambling activity, Donald incurred various expenses that were directly related to his gambling activity:

Car   expenses

Office   expense


Meals   (already at 50%)



Handicapping   data


The amounts and the direct relationship to his gambling business at not in question.
Donald is aware that there is some sort of rule about limiting wagering losses to wagering gains but he is hoping that his other business expenses are deductible on his Schedule C.
Your Assignment:
Prepare a tax research memo addressed to the files that explains what Donald’s tax treatment of his gambling losses and business expenses is? 
You will need to support your conclusion using primary sources of tax law. Your textbook is NOT primary authority. You may research ANY tax authority (primary or secondary) but your solution must be derived and supported using only primary authority.
You must use proper citation form in your memo (see Exhibit 2-5 in Chapter 2 of your textbook). The form for this communication should be professional and in the form of a tax research memo (see example on p.2-20). 
This memo should be whatever length you feel is appropriate to resolve the issues. We do NOT use a bibliography or list of references in a tax research memo. You will see that citations are within the text of the document. 
Your memo will be graded using a modified version of the College of Business Administration’s written communications rubric (posted in Blackboard). For this assignment, points are distributed as follows:
Content  15
Organization 3
Audience 3
Style 3
Mechanics 3
References  3
Total 30
Content will be broken down into 3 components: (1) Facts, (2) Analysis and (3) Conclusion. 

Exceeds   Expectations

Content   – Facts

All   pertinent facts have been described in a clear and concise manner. Distinguishing features of the fact pattern   are highlighted.

Critical   facts omitted. Unable to apply or   distinguish from other possible fact patterns or facts are merely copied   from case.
Content   – Analysis

All   necessary references to authority have been made. Authority which could apply but does not   has been distinguished from that which does. The analysis follows a logical pattern of application to the facts and   supports author’s conclusion.

Analysis   is deficient in reference to authoritative tax law. Analysis lacks cohesion and does not   support conclusion. 

Conclusion   is clear and integrates with facts and analysis. More than a simple sentence stating   conclusion. Cause and effect   relationship between facts and analysis are made. All open issues are responded to.   Conclusion drawn is correct.

Conclusion   is unclear and unsupported by analysis. Reader is not able to form educated opinion on tax treatment of facts   pattern.

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