Reference no: EM13121155

Write a memo identifying the legal ISSUE(s), conclusion, list of relevant authorities, discussion of the law, and the application of the law. Use the headings on page 149 of the text. Apply at least one relevant court case or revenue ruling. The most important aspects of the memo are the ISSUE statement(s) and the application of the law to the problem facts. The application should integrate reference to every source of law previously discussed. Do not just answer the question asked in the problem.

When discussing the law write at least one paragraph on the relevant Code language. Pinpoint the location of the relevant language in the Code as precisely as possible. Then add a paragraph(s) on any relevant Treasury Regulation. Then describe any relevant cases or Revenue Rulings. Write clearly and concisely so that the tax memo is normally limited to three pages. Use APA style on margins, fonts, grammar, punctuation, writing skills, and spacing. Use a memo format for your name, date, et cetera.

Sally became an employee of Gadget, Inc., a privately held firm. On December 15, 2013, Sally was allowed to buy 20,000 shares of Gadget stock for $40,000 dollars. When Sally bought the stock, each share was worth $2. Gadget retained the right to repurchase each share for $2 original purchase price if Sally leaves Gadget at any time during the next two years for any reason. Gadget stock increased to $5 per share in December 15, 2015, when the two year restriction ended. Sally sold the stock on January 18, 2016 for $9 per share, afte??#?e announcement of a new patent for Gadget. Advise Sally roughly how much tax she must pay and for what year(s). Assume Sally is in the 35% tax bracket for ordinary income and 15% for long term capital gains.