Ellie Executive lives in Florida with her family in a home bequeathed to her by her parents when they passed away. This year her employer assigned her to a position in London. The assignment is for a minimum of four years. Because she grew up in the house, Ellie would like to keep it and rent it out. There is no mortgage on the home, so renting will create a positive cash flow situation for her. Her employer will be providing her with a housing allowance to cover her London housing costs. Ellie believes the house has a fair market value of at least $500,000. Ellie wants to make sure that if she ends up selling it, she will not have any taxable income from the sale. She has asked for your guidance.
a. What additional questions do you need to ask the client before you begin your research?
b. What additional potential sources of information might you want to ask for?
c. Which of the preceding facts are relevant? Which are irrelevant?
d. Is there a chance that you will need to ask more questions at a later point? Why or why not?
e. What is the first question you will try to answer in your research? Are there any additional issues that you can identify at this time?
f. What is the taxpayer's desired result? Why is this important? How does it affect your role as tax advisor?
g. Is this a planning research type of situation? How do you know?