A tax memo example follows a fixed skeleton: a heading block, then a statement of facts, a question presented, a short answer, a discussion and analysis, and a conclusion. Each section has a specific job, and the memo works only when every section does its own. The walk-through below uses a single Section 1031 like-kind exchange fact pattern so you can see how the pieces connect from one section to the next.
The Heading Block
Every tax memo opens with an administrative header identifying the preparer, the recipient, the date, and the subject. The date is the piece that matters most. If the position is later challenged, the memo is contemporaneous evidence that the analysis happened before the return was filed, not after an audit notice arrived. Treat the date field as a substantive entry, not a formality.
Statement of Facts
The facts section sets the boundaries for the analysis. Include only facts that affect how the law applies, present them neutrally, and do not omit anything unfavorable. A memo that leaves out bad facts is worse than useless, because anyone relying on the conclusion is working from an incomplete picture.
A good test for each sentence: if removing this fact would not change the analysis, cut it. For the running example, the operative facts are that the taxpayer transferred a commercial warehouse held for business use, intended to acquire undeveloped land as replacement property, and identified the replacement property on the 50th day after the transfer of the relinquished property.
Question Presented
The question presented compresses the whole memo into one inquiry. It weaves together the legal issue, the controlling authority, and the specific facts that make the answer uncertain. “Does the client owe tax?” is not a question presented. This is:
Does the taxpayer’s exchange of a commercial warehouse for undeveloped land qualify for nonrecognition of gain under Section 1031, given that replacement property was identified on the 50th day after the relinquished property was transferred?
That version flags the statute, the transaction type, and the factual wrinkle. Section 1031 requires replacement property to be identified within 45 days of the transfer, so day 50 immediately signals where the tension lies.1Office of the Law Revision Counsel. 26 US Code 1031 – Exchange of Real Property Held for Productive Use or Investment A reader who sees only the question should already know what is at stake.
Short Answer
The short answer gives a busy reader the bottom line in one or two sentences. State the conclusion, then the primary reason. A partner scanning ten memos before a meeting should be able to read only the short answers and know where each client stands.
For the running example: No, the exchange likely does not qualify for nonrecognition treatment. The taxpayer identified the replacement property on day 50, which exceeds the 45-day identification window required by Section 1031(a)(3)(A).1Office of the Law Revision Counsel. 26 US Code 1031 – Exchange of Real Property Held for Productive Use or Investment Do not hedge more than the analysis actually requires. If the answer is “probably not,” say so and explain the uncertainty rather than burying the answer in qualifications.
Discussion and Analysis
The discussion is where the work happens. Most tax writers use some variation of CREAC: Conclusion, Rule, Explanation, Application, Conclusion. Lead with the answer, lay out the governing law, explain how courts and the IRS have interpreted it, apply it to the facts, and restate the conclusion. Each sub-issue gets its own cycle.
Stating the Rule
Identify the controlling authority in plain language. Do not copy statutory text verbatim; a reader who wants the exact language can pull the statute. What they need from the memo is a clear explanation of what the law requires.
For the 1031 example, the rule section explains that gain on the exchange of real property held for business or investment use goes unrecognized when the replacement property is of like kind, and that deferred exchanges impose two hard deadlines: 45 days to identify replacement property and 180 days to complete the exchange. Those deadlines cannot be extended for any reason short of a presidentially declared disaster.2Internal Revenue Service. IRS Fact Sheet FS-2008-18 – Like-Kind Exchanges Under IRC Section 1031
Applying the Law to the Facts
This is where memos either work or fall apart. Walk through each element of the rule and show how the facts satisfy or fail to satisfy it. Do not assert that facts “clearly meet” or “obviously violate” a requirement. Demonstrate it.
For the example, the application notes that the taxpayer transferred the relinquished property on a specific date and identified replacement property 50 days later. Because Section 1031(a)(3)(A) treats any property identified after day 45 as non-qualifying, the exchange fails the identification requirement.1Office of the Law Revision Counsel. 26 US Code 1031 – Exchange of Real Property Held for Productive Use or Investment The full gain becomes taxable. A clean factual application handles this in a few direct sentences.
Addressing Counterarguments
A credible tax memo anticipates the IRS’s likely counterarguments and addresses them. If there is a plausible reading of the statute or a line of case law running the other way, acknowledge it, explain it, and then explain why your conclusion is still stronger. Skipping counterarguments does not make them disappear; it just means the reader meets them for the first time during an audit.
The Hierarchy of Authorities
The discussion depends on citing the right level of authority. Getting the hierarchy wrong undermines everything above it. From most to least authoritative:
- The Internal Revenue Code, the statute enacted by Congress, is the starting point for any analysis.
- Treasury Regulations, issued by the Department of the Treasury to interpret and implement the Code. Final regulations carry significant legal weight and courts generally defer to them unless they conflict with the statute. Proposed and temporary regulations carry less.
- Revenue Rulings, official IRS interpretations of how the law applies to specific fact patterns. They do not carry the force of Treasury Regulations, but can be used as precedents in similar cases.3Internal Revenue Service. Internal Revenue Bulletin: 2026-03
- Case law. Supreme Court decisions bind all taxpayers; circuit court decisions bind taxpayers within that circuit.
- Private Letter Rulings and other informal guidance. These apply only to the taxpayer who requested them and cannot be cited as precedent, but they reveal how the IRS is thinking.
A Revenue Ruling represents the IRS’s conclusion on the specific facts described. The IRS itself cautions against assuming the same conclusion applies to other cases unless the facts are substantially the same, and practitioners must account for any subsequent legislation, regulations, or court decisions that may have changed the landscape.3Internal Revenue Service. Internal Revenue Bulletin: 2026-03 Do not lean on a Revenue Ruling when a Treasury Regulation directly addresses the same point.
Citation Format
Citations let the reader verify the analysis and signal that you have relied on the right level of authority. The conventions are precise.
Internal Revenue Code sections are cited by section number: I.R.C. § 1031(a)(3)(A). Treasury Regulations follow a title-and-section format drawn from the Code of Federal Regulations. A citation to a final income tax regulation looks like Treas. Reg. § 1.1031(a)-1, where the 1 before the period indicates it is an income tax regulation and the numbers after track the Code section being interpreted. A currently effective regulation does not need a date parenthetical, but include the year of the compilation if the regulation was recently amended or revoked.
Revenue Rulings are cited by number and year of issuance, such as Rev. Rul. 2005-7. Case citations follow standard legal citation format with the case name, reporter volume and page, and the court and year. Whatever format your firm uses, apply it consistently. Inconsistent citation is a credibility issue.
Conclusion
The conclusion restates the determination with more depth than the short answer, synthesizing the analytical steps that produced it. This is also where practical recommendations belong: documents to gather, deadlines to watch, elections to file, or alternative transaction structures that might produce a better tax result.
Two rules. Do not introduce new authorities or new facts; if something matters enough for the conclusion, it belonged in the discussion. And be specific about confidence. There is a meaningful difference between “supported by substantial authority” and “more likely than not correct.” Those phrases correspond to different penalty-protection thresholds, and the reader needs to know exactly where the analysis lands.
A Note on Privilege
Tax memos often analyze positions that could be challenged, so the limits of confidentiality matter before you write. The attorney-client privilege protects confidential communications made for the purpose of obtaining legal advice. The federally authorized tax practitioner privilege under IRC Section 7525 extends a similar shield to communications between a taxpayer and a CPA or enrolled agent, but it is narrower in two ways. It applies only in noncriminal tax matters before the IRS and in noncriminal tax proceedings in federal court, so it does not extend to criminal investigations or state tax proceedings. And it vanishes entirely for written communications connected to the promotion of a tax shelter.4Office of the Law Revision Counsel. 26 US Code 7525 – Confidentiality Privileges Relating to Taxpayer Communications If a memo analyzes a transaction the IRS later characterizes as a tax shelter, the practitioner privilege will not protect it. Objective, balanced analysis reads very differently from promotional material advocating an aggressive structure, and the distinction can decide whether the memo stays confidential.