Case Information:

Ozzie and Sherrie Johnson lived in Bishop, California. The Johnson’s 15-year-old son, Jack, was addicted to illegal drugs and experienced both physical and behavioral problems. In 2012, without the consultation of a psychiatrist or psychologist, the Johnsons sent Jack to a therapeutic boarding school, the Lonely Bridge School, in Idaho. Lonely Bridge was well known as a school in which celebrities and wealthy persons could enroll their “troubled” teens for 365 days a year for therapy and a high school education, and the school had a strong reputation nationally.

The Johnsons paid tuition of $48,000 in 2012 and incurred $12,000 in travel costs (airfare, rental cars, and lodging) to attend required parent-therapy sessions at the school. They also deposited $3,000 into a “personal account” that was used to cover expenses associated with therapy and was required to maintain matriculation at Lonely Bridge; the money was spent during the year.

Jack stayed most of 2012 and 2013 at Lonely Bridge before running away in late 2013. Although he no longer is physically addicted, his behavioral issues remain. In 2014, it was discovered that some of the staff at Lonely Bridge, although therapists, were not credentialed as had been previously thought and that the school was not accredited as parents had been led to believe. In addition, a number of high-profile “incidents” involving alleged unusual therapy methods and abuse resulted in Lonely Bridge closing in 2014.

Requirements:

1. Prepare a tax memo (no more than 5 pages excluding the cover page) to discuss whether the Johnsons can deduct the tuition, travel costs, and personal account expenses for tax purposes as a medical deduction (in excess of the floor). You memo should include the following elements.
   • Identify the facts and tax issue(s).
   • Locate the Internal Revenue Code Section, 1Regulation, 1 Revenue Ruling and 1 Court Case tosupport your research, cite the primary sources properly. Please note that more is not necessary better. Select the most relevant and up to date primary sources.
   • Analyze the situation and reach your conclusion
   • In addition, briefly describe how you found your primary sources, e.g. what keywords you used in searching, what documents/places you have reviewed that lead to the primary sources. Any tips and/or lessons you learned in the research process. You can use screen shots to explain the path of your searching process. This part is not counted toward the 5-page requirement for the tax memo.

1. Prepare your tax memo in a Word document and submit in Canvas