Tax File Memorandum

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Tax File Memorandum
Name
Course
Institution
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Your task is to research this issue and prepare a tax file memorandum. Your tax file memo must contain a summary of facts, statement of the issue, analysis and interpretation of the relevant tax law, and conclusion. One to two pages, single-spaced, is an appropriate length for this assignment.
Tax File Memorandum
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Subject: Tax treatment of the total cost of each modern green golf course
Date
Facts
There are six new greens with sophisticated drainage systems including subsurface drainage tiles and interconnected pipes that are replaced after every 20 years. The modern greens golf courses are meant to facilitate drainage and have drainage tiles and interconnected pipes. To analyze the tax treatment of the new greens there is a need to identify the depreciable and non-depreciable components. There are income tax savings for the depreciable categories compared to the assets that are not depreciated. The cost of each green was $115,000 and out of this $30,000 was for earthmoving, grading, and shaping of the land in preparation for construction. While the actual construction cost for the green is $85,000. Construction begins once there has been earthmoving, grading, and shaping.
Issue
The tax treatment of the total cost of each “modern” green golf course The tiles and pipes are replaced every 20 years the cost of earthmoving, grading, and shaping for land preparation is $ 30,000 and for construction of the green costs $85,000.
Analysis and interpretation
Rev. Rul. 2001-60, 2001-51 I.R.B. 587, issued in 20022 provides guidelines for the construction or reconstruction of modern golf course greens (IRS, 2002 a). One of these guidelines is that underground drainage tiles or pipes are depreciable components of the greens and golf course. there is tile and pipe deterioration over the next 20 years and the drainage system requires replacement Land preparation costs associated with the depreciable components are retired, ab...