IRAC METHOD OF LEGAL ANALYSIS

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IRAC Method of Legal Analysis
• Problem-solving technique useful for answering law problems.
• Elements of IRAC
 Issue
 Rule
 Application
 Conclusion

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IRAC Method of Legal Analysis
• Issue(s)
• When considering a legal problem, you should read the facts
carefully and identify the (legal) issues raised by the problem. Set
the identified issues out clearly and explicitly in your
response/answer.
• The Issue is the most important element in the analysis because
you need to know enough law to find the issue.
• The tutorial problems will guide you in identifying the legal issues.
Assessment questions may be more open-ended requiring to apply
your legal knowledge.

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IRAC Method of Legal Analysis
Rule/Relevant Law
• What law is relevant to resolving these legal issues?
• Is this law set out in legislation? If so, which sections are most
relevant? (Be as specific as possible, sometimes you may need to
refer to subsections.)
• Is there case law that is relevant? If so, which cases are most
relevant? What legal tests do they establish?
o Remember to include any law that might be relevant to any
counter-arguments (These will be discussed in tutorials where
relevant – assessment questions may require you to consider if
there are counterarguments without any prompts).

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IRAC Method of Legal Analysis
Application
Apply the relevant rules to the facts that created the legal issue(s).
• The analysis or application of the law to the facts is the heart of the
discussion. It is where most of the work (and the marks) are. It is
where you examine the inferences/implications raised by the facts in
light of the rule. As you write your analysis, work from your
explanation of the rule to guide your application of the facts. Here
your statement of the rule provides a blueprint to follow for your
discussion of the facts. You simply match up each element/factor
you’ve identified in the rule with a fact.
• This is where you might compare and contrast the facts of the
problem question with the facts of any cases that you have set out
in your relevant law. Similarities might be used to follow a similar
result. Differences might be used to justify a different outcome…

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IRAC Method of Legal Analysis
Conclusion
State the most likely conclusions building on the application section.
Don’t forget to include:
• possible alternative outcomes created by ambiguities in the facts
and relevant law;
• counter-arguments.

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IRAC Example
Fact Situation: Mary is employed as a waitress at the local
restaurant. From time to time, happy customers give her a tip
when they pay the restaurant for the meal – they give her some
extra cash at the same time.
Question: Is the tip ordinary income (OI) in Mary’s hands and
assessable under section 6-5 of the ITAA 1997?

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IRAC Example
Issue: You have been given the issue in the question so this part
is easy.
Rule: First you would identify and explain what section 6-5 says:
a taxpayer’s assessable income includes amounts that are
ordinary income (OI).
Case law shows that there are two steps to working out whether
an amount is OI:
• Step 1: does the amount meet the prerequisites of OI?
• The prerequisites are:
 Cash or Cash convertible (Cooke and Sherden)
 Real gain (Hochstrasser v Mayes)

Application: The tip meets the prerequisites of OI as it is cash

and because it increases Mary’s wealth it is also a real gain.
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IRAC Example
Rule: (cont):
• Step 2: does the amount have the characteristics of OI?
• The characteristics of OI are:
 Regular or periodic (Blake; Harris)
 The amount has a nexus with (flows from) an earning
activity (Eisner v Macomber)
 Of the two characteristics – nexus and flow is the most
important – one off payments may still be OI provided there
is a nexus with an earning activity.
 Tips have been found to be OI even though the payment is
voluntary, not regular and made by the customers and not
the employer (Calvert v Wainright) because tips are a
reward for good service.

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IRAC Example
• Application:
• Not clear from the facts if the tips are regular or periodic as
they are paid from time to time by the customers.
• The tip is a voluntary payment made by someone other
than the Mary’s employer (the customers). However, these
factors do not prevent the tip from having the
characteristics of OI because the case Calvert v Wainright
make it clear that the tip has a nexus with Mary’s earning
activity as a waitress – she receives it because of the good
service provided to the customers in the course of her
employment – it is a reward for her services in the same
way as her wages paid by her employer.

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IRAC Example
• [Note: there is a bit of overlap in the discussion of Calvert v
Wainright in Rule and Application. As you get better at
IRAC your discussion will flow seamlessly between the
discussion of the rule and application to the facts. The
Application above demonstrates how to analyse the facts
by reference to the relevant rules]

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IRAC Example
• Conclusion – the tip is ordinary income because it meets
the prerequisites of OI being cash and a real gain and has
the characteristics of OI as it flows from Mary’s earning
activity as a waitress (it doesn’t matter that it may not be
regular or periodic).
• The tip is included in Mary’s assessable income as OI
under section 6-5 of the ITAA 1936.
• The question only asked you if the tips Mary received are
OI. Therefore it is unnecessary to consider in detail if the
amount is statutory income under s 15-2 of the ITAA 1997
• If the question asked whether the tips are assessable
income then you would need to consider if the amount is
not only OI but also statutory income.

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IRAC Example
• Chapter 2 of POTL – the prescribed textbook – discusses
Study Skills for Taxation Law and at para 2.120 to 2-190
discusses an approach to researching and answering a
taxation law problem that is similar to IRAC.

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