Background: Your new client, Ricardo Salazaar ("Salazaar”), is a dentist. His filing status is Married Filing Jointly. His spouse does not work. He owns and operates a dentistry office through an S corporation, Dentistry Gold Inc. ("Dentistry Gold"). He is the sole owner of Dentistry Gold. Last year Salazaar purchased the land and building where he operates the dental practice. His attorney advised him for legal reasons to set up another S corporation to own the real property separate from the dental practice and not in his name and rent the building to Dentistry Gold. The new S corporation, that owns the land and building, is called Gold Land, Inc. ("Gold Land"). Since Dentistry Gold already had a lease agreement for the rental expense the previous tax advisor instructed Salazaar to have Dentistry Gold's business attorney to prepare a lease agreement between Dentistry Gold and Gold Land on the same terms and conditions. Dentistry Gold paid a salary to Salazaar of $140,000 for the 2023 tax year. The net rental income earned by Gold Land is $50,000 for the 2023 tax year. The net ordinary income earned by Dentistry Gold for the 2023 tax year after all expenses is $150,000. Dentistry Gold did not employ anyone else in the business. The unadjusted basis of the assets in Dentistry Gold is $50,000. In addition, Saalazaar and his wife had passive losses of $20,000 for the 2023 tax year and investment income of $30,000. Salazaar's previous tax advisor died on December 15, 2023 and this is how he and his wife became your clients. Normally his tax advisor would tell him how much income tax to withhold from his salary for the paycheck that was paid on December 31 at the end of the year as there were no withholdings during the year. The death of the tax advisor meant that Salazaar had the payroll run so that he paid in $75,000 in federal income tax withholding. He and his wife own their own home outright and their itemized deductions for the 2023 tax year would amount to $12,000. Salazaar remembers his previous tax advisor discussing passive income and passive losses, the Qualifying Business Income ("QBI") deduction and the net investment income tax ("NIIT") but he did not quite remember how it all worked. Salazaar wants to understands the income taxes that he needs to pay for the 2023 tax year. Issues: Salazaar needs advice for the following, and requires primary authorities to support the answer: 1. Can the net rental income that he earns from Gold Land offset his passive losses for the 2023 tax year? 2. Is the net rental income that he earns from Gold Land subject to the net investment income tax? 3. What is his QBI deduction, if any for the 2023 tax year? When looking for primary authorities you should consider these authorities (but this is not an exhaustive list): IRC §469 Regs §1.469-2(f) IRC § 1411 Regs §1.1411-4(g) IRC § 199A Regs §1.199A-1(b)(14) Regs §1.199A-5(c)(2) Schumann, T.C. Memo. 2014-138. Your research should consider the above cited authorities and the associated regulations and other primary authorities that you believe are relevant to the situation. Your responsibility: Prepare a tax research memo addressing all the questions that has been raised. Please note that if the tax memo is not in the required format and/or contains very little analysis of primary authorities you will receive a zero (0) for the assignment. You will need to support your conclusion using primary sources of tax law. Your textbook is NOT a primary authority nor are IRS Publications. Please refer to Chapter 2 for primary authorities. CCH AnswerConnect is not a primary authority, nor is Google Scholar nor are any other websites you may access. The primary authorities are legislative, administrative and judicial. You may use secondary authorities to assist you with identification and understanding the primary authorities, such as CCH AnswerConnect but your memo should only contain primary authorities. You must use proper citation form in your memo (see Chapter 2 for help with citation form). The form for this communication should be professional and in the form of a tax research memo (examples posted on Canvas and a similar example in your textbook). You will see that citations are within the text of the document in the example. Once a court case has been cited in full, it can be referred to using simply the name in italics. Please use your own words and do not quote large amounts from the primary authorities. If the reader wants to see the wording of the primary authorities you have provided the citation for the reader to go and look at the wording from the primary authorities. Do yourself a favor and look at the grading rubric before you submit. This memo should be whatever length you feel is appropriate to resolve the issues. We do NOT use a bibliography or list of references in a tax research memo. We do not include Background in a tax memo. The Background is provided so you can identify the relevant facts. You are required to INDIVIDUALLY prepare this document. Please upload your memo to Canvas before the due date and time. TurnitIn will be used to check for plagiarism. Late assignments are not accepted. The grading rubric for Tax memos is posted in Canvas. For this assignment, points are distributed as follows: Aspects of the memo Points Content - facts and issue(s) 16 Content analysis Content conclusion Organization Audience 30 14 8 8 Style Mechanics 8 Referencing ∞ ∞ ∞ 8 8 Total 100