Worked Example, Tax Research, Start to Finish (and the verification catching a fake)

Why this page exists. The other guides tell you the method; this one shows it on a real (anonymized) question, including the moment the AI confidently cites a regulation that does not exist, and the verification step catching it. That catch is the whole point of Module 2. Illustrative only, not tax advice.

The starting point, a messy client note

What landed in the inbox (fabricated, but typical):

Jane Doe (SSN 123-45-6789), sole owner of Acme Holdings LLC (S-corp), EIN 12-3456789,
works from a dedicated home office. Can the S-corp reimburse her for the home office,
and is it deductible? Her AGI is around $180k.

Step 1, Scrub it (so no client data goes to the AI)

Run it through Redactor. What goes to the AI:

[Person_1], sole owner of [Entity_1] (S-corp), works from a dedicated home office.
Can the S-corp reimburse her for the home office, and is it deductible? AGI ~$180k.

Names, SSN, and EIN never left the building. The tax-relevant facts, S-corp, sole owner-employee, dedicated home office, income level, are all preserved. (Local key stays on your machine for Step 5.)

Step 2, The AI's first-pass answer (do NOT trust it yet)

The assistant returns something like this:

An S-corporation can reimburse an owner-employee for home-office expenses through an
accountable plan under IRC §62(a)(2)(A) and Treas. Reg. §1.62-2, deductible by the
S-corp and excludable to the employee. The home office must meet the "regular and
exclusive use" test of IRC §280A(c)(1). See also Rev. Rul. 2018-14, which confirms
accountable-plan reimbursement of home-office expense for S-corp shareholders.

Reads perfectly. Sounds authoritative. This is exactly when a busy preparer copies it, and that's the mistake.

Step 3, Run the verification gate (the part that matters)

Open each authority against a free primary source and confirm it exists and says what's claimed:

Three real, load-bearing cites, and one confidently invented ruling. The first three carry the analysis; the fourth would have put a fake authority into your file. The gate caught it because we looked, instead of trusting the paraphrase.

This is the proof. General AI doesn't know whether a citation is real, it generates text that looks like a citation. On any given answer, some cites are solid and some are fiction, and they're indistinguishable until you check. The verify-loop is not optional ceremony; it's the difference between research and a liability.

Step 4, The verified conclusion (built only from what survived)

An S-corp can reimburse an owner-employee for a qualifying home office through an
accountable plan (IRC §62(a)(2)(A); Treas. Reg. §1.62-2): deductible to the S-corp,
excludable to the employee. The space must meet §280A(c)(1) regular-and-exclusive-use.
[Open items: confirm a written accountable-plan exists; confirm exclusive use; compute
the allocable amount.]

Notice the fabricated ruling is gone, and open items are flagged rather than glossed.

Step 5, Re-attach and document

Use the local key to swap [Person_1] / [Entity_1] back to Jane Doe / Acme Holdings (the Fact Scrub "Bring the answer back" step), and record it in the Research Memo with the verification table from Step 3. You sign it, the conclusion is the firm's, not the AI's.

The one takeaway

Of four authoritative-sounding citations, one was fake, and you could not tell which by reading. That's why every cite is unverified until checked against primary source, and why this is the most important habit in the whole library.

Illustrative example, not tax advice. Verify all authorities and conclusions independently.