Write a File MEMO on any one of the topics below.

Required: In your written memorandums, cite all relevant authority and provide appropriate discussion
of that authority (i.e. provide discussion that is similar to that of the law and analysis section of a
Revenue Ruling and/or the analysis section of a judicial brief). Limit your discussion to a maximum of
four pages (double spaced). Note: You must discuss the relevance of the potential research material
given to you, in addition to other material you find.

Choose one Topic from the 5 listed below:

1. Clarence is a packrat. He has clothes from when he was in high school some twenty years ago that he
would never wear. He also has household items that have accumulated over the past fifteen years.
Some of these household items have not been used by Clarence in years and he is not sure if they even
work. Clarence is buying a new home and wants to clean out his closets before he moves into his new
house. He would like to give all of his old clothes and household items to local charities. He wants to
know what, if any, restrictions apply to charitable deductions of old clothes and household items.

2. Samuel was born male but diagnosed with gender identity disorder. As a result, he suffered persistent
psychological discomfort with his gender and decided to have a sex change operation. As part of the
treatment regimen, Samuel had to undergo various hormonal treatments for several years, followed by
a period in which he changed his name to Sally and lived for two years as a female before finally having
gender reassignment surgery in 2012. Is Sally entitled to a medical deduction for the costs of the
hormone treatments, surgeries and related expenses?

3. Four individuals form Triangle Properties as a C Corporation in 2005. The corporation is domiciled in
North Carolina. The corporation invested in commercial rental properties that generated passive activity
losses. The shareholders made a Subchapter S election for Triangle Properties effective on January 1,
2011. On the date of the conversion, Triangle Properties had $118,000 of suspended passive activity
losses from its commercial rental properties. In 201, the properties generated $44,000 of net rental
income. Can Triangle Properties carry forward and deduct the suspended passive losses incurred when it
was a C corporation against the passive rental income earned while it was an S corporation?

4. Frank and Sharon have been married for five years. Without Franks knowledge, Sharon has been
operating an escort service from the local bar. This years operations were very profitable. In fact, if
Sharon had reported the net escort income, their joint Federal income tax liability would have increased
by $50,000. When Sharon is finally nabbed the police, she is taken to jail. Frank is unable to locate any of
Sharons earnings in their personal bank or brokerage accounts. Can Frank fend off the IRSs charge that
he should pay the $50,000 in tax, plus interest and penalties, from his salary as an engineer?
5. Ace High and Lady Luck live together and have pooled their funds for several months to purchase food
and other household necessities and to buy an occasional state lottery ticket. Ace used part of these
pooled funds to buy a lottery ticket that won $3 million. When they discovered that the lottery proceeds
could be paid only to one recipient under state law, Ace and Lady executed a separate ownership
agreement. The agreement created an equal interest in the ticket for both Ace and Lady. Must Ace pay
gift tax on the transfer of a one-half interest in the ticket to Lady? If so, what is the value of the gift?