Tax case study
Prepare a protest to the Appeals Division of the Internal Revenue Service regarding the adjustments proposed by the examining agent in the Case Study.
The protest written assignment needs to be follow order:
Issue, Unagreed proposed Adjustment, Facts, Applicable laws, IRS examination, Argument, and Conclusion
Final Case Study
Fred and Ethel Mertze reside at 407 Cuban Lane, Columbia, South Carolina. They have been somewhat happily married for 17 years and always file a joint tax return. Although they generally agree on most important issues, they are fundamentally different in their cleanliness habits. Fred is a very meticulous person who cannot tolerant an unkempt house. Ethel is a tad slovenly and often leaves her things lying around. At times, Ethel's habits can make Fred very angry.
One morning during the Fall of 2012, Fred found a crumpled Kleenex on the bathroom vanity. Disgusted, he flushed it down the toilet. Unfortunately, the Kleenex was wrapped around Ethel's diamond engagement ring. Ethel had removed the ring the previous evening after cutting her finger while chopping vegetables. Despite having a plumber and the city sanitary engineers search for the ring, it appears to be lost forever.
The ring originally cost $50,000 and, at the time of the loss, had a fair market value of $75,000. Fred and Ethel are very upset about the loss especially since the loss is not covered by their homeowner's insurance policy. However, Fred realizes that some good may come of the loss if he can get a tax deduction for it.
It is November 7, 2014. Fred and Ethel Mertze come to your office seeking your tax advice. Fred and Ethel are referred to you by their good friend and your long-time client Lucy Ricarrda.
Apparently, Fred and Ethel decided to claim a casualty loss for the 2012 loss of Ethel's diamond engagement ring in the amount of $50,000.
Shortly after filing their 2012 Federal income tax return (Form 1040), the Internal Revenue Service started an examination of the return. The audit was assigned to Revenue Agent Ted Examiner. Fred thought the audit had gone well. However, Fred and Ethel received a thirty-day letter from the revenue agent wherein he completely disallowed the claimed casualty loss on the ring.
Fred and Ethel are unhappy about the result of the audit. They want you to file a formal protest with the Appeals Division of the IRS contesting the adjustment. The thirty-day letter containing the adjustment and the reason for the adjustment are attached.
Please prepare the requested protest.
1. Identifiable
2. damaging to the property
3. sudden,
4. unexpected, and
5. unusual in nature.
In Keenan v. Bowers 91 F.Supp. 771 (DC SC 1950), the court held on identical facts that the loss was not "sudden" and disallowed the casualty lost. It is determined that none of the requirements of Rev. Rul. 72-592 have been met.
Conclusion:
Accordingly, it has been determined that no casualty loss has occurred. The deduction is disallowed. It is presumed that the taxpayers disagree with this adjustment.
please use 26 U.S.C section 165, Rev.Rul 72-592, 1972-2 C.B, Keenan v.bowers, and Caroenter v. Comissioner, and White v.Commisioner 48 T.C. 430 (1967)