| Course | ACC-6060 Federal Taxation |
|---|---|
| Module | Module 1 |
| Paper type | Module 1 written assignment: the U.S. tax system |
| Length | About 811 words, 5 pages |
| Format | APA 7 student paper |
| School | Thomas Edison State University |
| Program | Master of Science in Accounting |
| Updated | October 2026 |
Free sample paper for ACC 6060 Module 1
Business or Hobby? Tax Policy Basics and a Research Memo for a Weekend Potter
Student Name
Master of Science in Accounting, Thomas Edison State University
ACC-6060: Federal Taxation
Mentor Name
Month Day, Year
Business or Hobby? Tax Policy Basics and a Research Memo for a Weekend Potter
Part A: Rate Structures and Evaluating a Tax
A tax's structure describes how the average rate changes as the base grows. A proportional tax applies one rate to all levels of the base, as many state sales taxes do. A progressive tax raises the average rate as the base rises, as the federal income tax does through its brackets. A regressive tax falls hardest, as a share of income, on those who earn least; sales taxes behave this way because poorer households spend more of what they earn, and payroll taxes do because they stop at a wage cap (Spilker et al., 2019).
Adam Smith's standards remain the common tests of a good tax. Equity asks whether the tax treats people fairly, both horizontally, taxing people in similar situations similarly, and vertically, asking those with more ability to pay to pay more. Certainty asks whether taxpayers can know what they owe. Convenience asks whether the tax is easy to pay. Economy asks whether the tax is cheap to administer and comply with. Modern analysis adds sufficiency, whether the tax raises enough revenue, and neutrality, whether it distorts economic choices. Compliance depends on structure too: Slemrod (2007) shows that noncompliance is far higher for income not reported to the IRS by third parties, such as small business income. The hobby loss rules discussed below show the trade-offs: they protect the base against disguised personal spending, but their facts-and-circumstances tests reduce certainty.
Part B: Sources of Federal Tax Law
After Loper Bright Enterprises v. Raimondo in 2024, courts no longer defer to an agency's reading of an ambiguous statute, so Treasury's interpretations of the Code must persuade on their merits, which may leave some regulations open to challenge.
| Source | Who issues it | Authority |
|---|---|---|
| Internal Revenue Code | Congress | Highest statutory authority |
| Treasury regulations | Treasury Department | Interpret the Code; final regulations carry great weight with courts |
| Revenue rulings and procedures | IRS | Official IRS positions applying the law to facts; binding on the IRS |
| Private letter rulings | IRS, to one taxpayer | Binding only for the requesting taxpayer |
| Court decisions | Tax Court, district courts, Court of Federal Claims, appeals courts, Supreme Court | Interpret the law; precedent depends on the court and circuit |
Part C: Research Memo
To: Client file, Ella Marchetti. From: Tax staff. Re: Deductibility of 2024 pottery losses.
Facts. Ms. Marchetti, a full-time nurse, makes and sells pottery at weekend craft fairs. In 2024 she had $6,800 of sales and $14,300 of expenses for clay, kiln fuel, booth fees and travel. She has reported losses in four of the past five years, keeps receipts but no separate business account, and has taken a pottery business course. She asks whether she can deduct the $7,500 loss against her wages.
Issue. Does Ms. Marchetti sell pottery with an honest objective of making money, so the loss can offset her wages, or is it a pastime that Section 183 treats as a hobby?
Authority. The Code's hobby loss provision, Section 183, restricts what an individual may deduct for an activity pursued without a real profit objective. Regulations under Section 183 list nine factors, including how businesslike the operation is, the taxpayer's expertise, time and effort, expectation that assets will appreciate, success in other activities, history of income or losses, occasional profits, financial status and elements of personal pleasure. If the activity shows a profit in at least three of five consecutive years, the law presumes a profit motive. Since 2018, a hobby's expenses are not deductible at all while its income remains taxable, because they were miscellaneous itemized deductions suspended through 2025.
Analysis. Several factors favor a business: she sells regularly, has taken training and could build profits as she develops a following. Others weigh against: she has a profitable full-time job, has lost money four of five years, does not keep separate accounts or a business plan, and pottery is a pastime she enjoys. She does not meet the three-of-five-year presumption. Courts often give weight to whether the taxpayer changed methods to improve profitability after losses.
Conclusion. On current facts, the activity is more likely to be treated as a hobby, in which case the $6,800 of sales is taxable income and the $14,300 of expenses is not deductible. To strengthen a business position, she should open a separate account, prepare a written plan with pricing and marketing changes and track time. If she reaches profit in three of five years, the presumption would shift in her favor.
Further research. Before finalizing the memo, the staff should check Tax Court decisions on craft and art activities with similar facts, since courts weigh the nine factors differently depending on the record. Cases in which taxpayers kept separate accounts, changed pricing after losses and sought expert advice have more often been decided for the taxpayer.
References
Slemrod, J. (2007). Cheating ourselves: The economics of tax evasion. Journal of Economic Perspectives, 21(1), 25-48. https://doi.org/10.1257/jep.21.1.25
Spilker, B. C., Ayers, B. C., Outslay, E., Weaver, C. D., Barrick, J. A., Robinson, J. R., & Worsham, R. G. (2019). Taxation of individuals and business entities. McGraw-Hill Education.
26 U.S.C. ยง 183 (2024). Activities not engaged in for profit.
What the ACC 6060 Module 1 instructions ask for
ACC-6060 is an eight-week course with six written assignments across its seven modules, worth 7 percent each and 42 percent in all, along with four discussions, seven quizzes and proctored midterm and final exams. The written assignment for Module 1 covers the U.S. tax system, using Spilker and colleagues' text. Prompts here often combine conceptual questions on tax rate structures, the standards for a good tax and the sources of tax law with an introductory research task, such as finding and weighing authority for a client question and writing a memo. This sample covers both, with a research memo on a common individual question; your own prompt may name a different issue.
Inside the ACC 6060 Module 1 example
Part A explains the three rate structures with examples and sets out the classic and modern standards for evaluating a tax, linking them to the issue the memo will address. Part B ranks the sources of federal tax law in a table by issuer and authority and notes how the 2024 deference decision affects regulations. Part C is a research memo in standard form, facts, issue, authority, analysis and conclusion, that applies the nine regulatory factors to the client and gives practical recommendations. The memo format is the one tax professionals use and can be reused for later research questions. The memo can be adapted to any question by replacing the facts and authority.
Reading the ACC 6060 Module 1 grading rubric
Seven points of the final grade ride on this first tax assignment, scored against the course rubric. For this assignment, mentors look for precise definitions of the rate structures and the tests of a good tax, a correct ranking of authorities and a memo whose issue is framed narrowly, whose authority is primary and whose conclusion follows from the facts. Recognizing current law, such as the suspension of miscellaneous itemized deductions, demonstrates care. Memos lose points when they reach a conclusion without analyzing the factors or rely on secondary sources instead of the Code and regulations. A memo that states what additional facts would change its conclusion shows the professional caution reviewers expect from tax staff.
ACC 6060 Module 1 help: mistakes that cost marks
The most common problems in tax research memos are a vague issue statement, a list of authorities without application and a conclusion stated with more certainty than the facts support. Phrase the issue as a question the law can answer. Cite the Code and regulations first, then rulings and cases. Weigh the factors that cut each way, and say what facts would change the answer. Check current law, since many provisions changed after 2017. Keep the memo to the facts that matter for the issue, and separate what the authority says from your judgment about how it applies. A free first sample of a research memo for your own ACC-6060 Module 1 question is available on request.
Write yours, or have the desk draft it
This paper is an original model document written by our desk, not a submitted student paper and not an official Thomas Edison State University document. Read it for the moves, then write your own to the instructions in your classroom. If you want one built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.
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ACC 6060 Module 1 questions, answered
Where can I find a free ACC 6060 Module 1 sample paper?
The ACC-6060 tax system assignment is printed above: rate structures, standards for a good tax, the sources of tax law and a research memo on whether a potter's activity is a business or a hobby.
What is the difference between progressive and regressive taxes?
Under a progressive tax, the average rate climbs as income grows; a regressive tax claims a bigger fraction of a poorer household's income than a richer one's.
What are the sources of federal tax law?
The Code itself sits on top, then Treasury's regulations, then the IRS's own rulings and procedures, with court decisions weighed alongside them.
How does the IRS decide whether an activity is a hobby?
The regulations list nine factors, such as businesslike records, expertise and the history of losses; showing a profit in three of any five consecutive years shifts the presumption in the taxpayer's favor.
Can hobby expenses be deducted?
For 2018 through 2025, hobby expenses are not deductible, while hobby income remains taxable.