At the beginning of the current year, Sandy Brewer had a zero basis in her 38 shares of stock in Lindlee, an S corporation, a zero basis in a $5,000 note from Lindlee, and a $7,400 carryforward of a prior year ordinary loss from Lindlee that she was unable to deduct be-cause of the basis limitation. Early in February of the current year, Sandy was notified by Lindlee’s attorney that the corporation was bankrupt. Consequently, Lindlee was defaulting on its $5,000 debt to Sandy, and Sandy’s 38 shares of stock were worthless. Describe the consequences to Sandy of the worthlessness of her Lindlee investments (note, stock and loss carryforward). Take into consideration the effect that basis (or lack of) has on the stock, loan and loss carryforward.
-Demonstrate an understanding of a worthless investment.
-Apply the basis limitation on the deduction of S corporation losses
-Demonstrate the use of proper English to write a Tax Research Memo
-Technical accuracy based on Chapter 10 concepts
-Use the tax memo format from Chapter 5 (Summary of Facts, Research Issue, Law and Analysis and Conclusion). YOU ARE NOT WRITING A LETTER TO THE CLIENT. YOU ARE WRITING A MEMO.
Tax Research Memo Rubric
Tax Research Memo Rubric
Criteria Ratings Pts
This criterion is linked to a Learning OutcomeQuality of information
25 to >22.75 pts
Excellent
Covers topic thoroughly, includes details that support the topic
22.75 to >20.5 pts
Admirable
Includes essential information, includes some supporting details
20.5 to >18.4 pts
Acceptable
Includes most essential information, details are somewhat sketchy
18.4 to >0 pts
Unacceptable
Lacks essential information
25 pts
This criterion is linked to a Learning OutcomeOrganization
25 to >22.75 pts
Excellent
Well organized and coherent, topics are in logical sequence, includes clear introduction and conclusions
22.75 to >20.5 pts
Admirable
Organized, some topics are out of logical order, conclusions are generally clear
20.5 to >18.4 pts
Acceptable
Some organization, topics jump around, conclusions are unclear
18.4 to >0 pts
Unacceptable
Not organized, topics make no sense
25 pts
This criterion is linked to a Learning OutcomeGrammar and spelling
25 to >22.75 pts
Excellent
All grammar and spelling are correct
22.75 to >20.5 pts
Admirable
Only one or two errors
20.5 to >18.4 pts
Acceptable
More than two errors
18.4 to >0 pts
Unacceptable
Very frequent grammar and/or spelling errors
25 pts
This criterion is linked to a Learning OutcomeVisual design
25 to >22.75 pts
Excellent
Visually appealing, clean simple layout, text is easy to read, graphics enhance understanding of ideas
22.75 to >20.5 pts
Admirable
Visually attractive, text is easy to read, colors enhance readability, graphics and special effects do not distract from understanding ideas
20.5 to >18.4 pts
Acceptable
Text is sometimes hard to read, sometimes graphics or special effects distract from understanding
18.4 to >0 pts
Unacceptable
Text is very difficult to read, layout is cluttered and confusing
25 pts
Total Points: 100