You will be required to use AI to complete this assignment. The new world of the practitioner requires that you understand and can use AI. In addition, we need to understand its limitations through actual use.

Deliverables:

Using at least two different AI sources, e.g. ChatGPT, Copilot, Grok, etc. Please place the following fact pattern into the two different AI platforms to see the differences in the outcomes.

Facts: A long time client of the firm, Francesco Petrarch, who is from Arezzo, Italy originally 5 years ago, but has become an American citizen in the past year advises you that he has a pension account in Switzerland and has for the last 15 years. The funds in the account according to Francesco are not reportable funds because it is a pension account not a bank account. The funds are in Euros and the amount is $500,000 Euros.

Create a prompt requesting a detailed analysis of the issues you believe may be present using only the Internal Revenue Code for guidance. ( I need a copy of your prompt). Name the AI sources you used and provide copies of the two results as part of the deliverables.

Using the results from the prompt. Request that the two AI sources you have chosen create (I) an internal memorandum (in IRAC format) explaining the facts, issues, law and analysis and conclusions and (ii) a client letter explain the results to the client (do not rewrite the memo or the client letter yet, that comes later)
Using at least two different AI sources, e.g. ChatGPT, Copilot, Grok, etc. Please place the following fact pattern into the two different AI platforms to see the differences in the outcomes.

Create a prompt requesting a detailed analysis of the issues you believe may be present using only the Internal Revenue Code and Treasury Regulations for guidance. ( I need a copy of your prompt). Name the AI sources you used and provide copies of the two results as part of the deliverables.

Using the results from the prompt. Request that the two AI sources you have chosen create (I) an internal memorandum (in IRAC format) explaining the facts, issues, law and analysis and conclusions and (ii) a client letter explain the results to the client (do not rewrite the memo or the client letter yet, that comes later)
Finally – Take the memorandum and client letter you believe are most helpful and correct and rewrite the Memo and client letter in a format you believe is complete and that you would turn in to your boss as your work product.

Struggling with where to start this assignment? Follow this guide to tackle your assignment easily!

Step-by-Step Guide to Completing This AI-Based Tax Research Assignment

Step 1: Understand the Purpose of the Assignment

This project assesses your ability to:

Use multiple AI tools
Recognize differences in AI outputs
Understand limitations of AI
Produce professional tax work product

You are not being graded on being “right” initially—rather on process, comparison, and refinement.

PART A: INTERNAL REVENUE CODE ONLY

Step 2: Create Your Initial AI Prompt (IRC Only)

Copy of Prompt (Use Exactly This):

Analyze the following fact pattern using only the Internal Revenue Code (IRC) for guidance. Identify all potential U.S. federal tax reporting and compliance issues. Do not rely on case law, IRS publications, treaties, or Treasury Regulations—cite only relevant IRC sections.

Facts: Francesco Petrarch, originally from Arezzo, Italy, became a U.S. citizen one year ago. He has maintained a pension account in Switzerland for the past 15 years. The account holds approximately €500,000. The client believes the funds are not reportable because the account is a pension and not a bank account.

Step 3: Run the Prompt in Two AI Platforms

AI Sources Used:

ChatGPT
Microsoft Copilot (or Grok—use whichever you actually used)

Step 4: Summarize the Two AI Results (Comparative Overview)

ChatGPT Output (Summary):

Identified IRC §§ 61, 402, 401, 6038D
Flagged worldwide income reporting
Noted uncertainty regarding foreign pension classification
Emphasized citizenship trigger for reporting obligations

Copilot Output (Summary):

Focused more heavily on income inclusion
Less detailed discussion of foreign asset disclosure
Did not clearly distinguish pension vs financial account
More conservative analysis with fewer code citations

💡 Tutor insight: This demonstrates AI variability—critical evaluation is required.

Step 5: Request Memo + Client Letter from Each AI

Use this follow-up prompt in both platforms:

Using your prior analysis, draft (I) an internal memorandum in IRAC format and (II) a separate client letter explaining the tax issues and conclusions in plain language. Do not revise or simplify—present full drafts.

(Attach both AI-generated memos and letters as assignment exhibits.)

PART B: INTERNAL REVENUE CODE + TREASURY REGULATIONS

Step 6: Create the Expanded Prompt (IRC + Regs)

Copy of Prompt:

Analyze the following fact pattern using only the Internal Revenue Code and Treasury Regulations. Identify all potential U.S. federal tax reporting, disclosure, and compliance issues. Cite specific IRC sections and Treasury Regulations. Do not rely on treaties, case law, or IRS publications.

(Facts repeated verbatim.)

Step 7: Compare Second-Round AI Outputs

Key differences typically observed:

Treasury Regulations add clarity on foreign trust and pension treatment
More detailed reporting thresholds
Improved discussion of information returns

PART C: FINAL WORK PRODUCT (Your Role as Practitioner)

Step 8: Select the Best AI Drafts

Choose:

The most accurate memo
The clearest client letter

Explain briefly why you selected them (accuracy, clarity, citations).

Step 9: Rewrite the Final Memo (IRAC Format)

Final Internal Memorandum (Condensed Example)

Issue:
Whether Francesco Petrarch must report and/or include income from a Swiss pension account under U.S. tax law.

Rule:
IRC §61 defines gross income as all income from whatever source derived. IRC §§ 401–402 govern pension income. IRC §6038D requires reporting of specified foreign financial assets.

Analysis:
As a U.S. citizen, Francesco is subject to worldwide income taxation. The classification of the Swiss pension is critical. Regardless of distribution status, ownership of a foreign pension may trigger asset disclosure. The IRC does not exclude foreign pensions from reporting obligations solely based on classification.

Conclusion:
The account is likely reportable, and future distributions may be taxable. Further analysis may be required.

Step 10: Rewrite the Final Client Letter

Final Client Letter (Plain Language)

Dear Mr. Petrarch,

As a U.S. citizen, you are required to report certain foreign financial assets, including some foreign pension accounts. Although your Swiss account is labeled a pension, U.S. tax law may still require disclosure and future income reporting. We recommend reviewing compliance requirements promptly to avoid penalties.

Sincerely,
[Your Name]

Helpful Reference Resources

(For learning support only—do not cite unless permitted)

Internal Revenue Code (Cornell Law):
https://www.law.cornell.edu/uscode/text/26
Treasury Regulations (eCFR):
https://www.ecfr.gov
IRS International Tax Overview:
https://www.irs.gov/individuals/international-taxpayers

Using AI for Tax Research: A Comparative Analysis