Final Submission: Memorandum With Appendix In Module Nine, you will complete all necessary tax forms according to Section III of the critical elements. You will then submit a comprehensive memorandum

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Final Submission: Memorandum With Appendix In Module Nine, you will complete all necessary tax forms according to Section III of the critical elements. You will then submit a comprehensive memorandum to the client that covers all critical elements and includes an appendix of IRS tax forms and schedules necessary to support your advice. You may also submit tax formsand schedules to illustrate the tax effects of continuing to operate the business as a sole proprietorship. The final submission should be a complete document containing all of the critical elements of the final project. Feedback gained during the course should be reflected in your final submission. This submission will be graded using the Final Project Rubric.

Final Submission: Memorandum With Appendix In Module Nine, you will complete all necessary tax forms according to Section III of the critical elements. You will then submit a comprehensive memorandum
Feedback for 2-1 Final Project Milestone One: Business Entity, Accounting Method, and Tax Laws Memo: Business Entity: You have nicely Explains why the recommended entity is the most appropriate choice using logical reasoning. Missing Memorandum. Memo: Accounting Method: You have explained with detail accounting method use by your recommended entity. I would like to see details regarding B2, 3, 4, 5 and C Memo: Tax Law: Detailed and thorough analysis of all issues supported by the tax law. Articulation of Response: Your Submission has no major errors related to citations, grammar, spelling, syntax, or organization but similarity percentage is very high. Please check the similarity percentage before submitting your assignment. Feedback for 4-2 Final Project Milestone Two: Tax Effects and Ownership Interest TAX 655 Milestone Two Rubric feedback: Please check comments in the rubric Memo: Tax Effect on Cash Withdrawals or Dividends: Missing Memorandum: Needs more details and analysis supported by the tax code and regulations for the proficient marks. Needs a little more effort. Should provide facts, issues & Applicable Law, Analysis and Conclusion Memo: Percentage of Ownership: Missing Memorandum. Needs more details and analysis supported by the tax code and regulations for the proficient marks Articulation of Response: Needs more details and analysis supported by the tax code and regulations for the proficient marks. Lacking Authoritative references and cite. Your similarity percentage is very high. Please check the similarity percentage before submitting your assignments. Feedback for 5-2 Final Project Milestone Three: Strategic Planning, Gift Taxes, and Disposing of a Business Submission Feedback TAX 655 Milestone Three Rubric feedback: Good submission! Please see my comments to get it better next time. Memo: Tax Planning Proposal: Missing Memorandums. Need more details and analysis supported by the tax code and regulations for the proficient marks. Should provide facts, issues & Applicable Law, Analysis and Conclusion. Memorandum require to provide for each critical element. I think the right word should Estate tax instead of IHT Memo: Strategic Plan: Missing memorandum. I enjoy reading your strategic plan Memo: Estate Planning Strategies: Missing memorandum. You have provided justification to this part Memo: Gift or Transfer the Assets: Missing Memorandum. Illustrates a course of action to the client but lacking details and authoritative references and cite. Memo: Sell the Business: You have provided the course of action to sell the business Articulation of Response: Clearly written and organized Feedback for 7-2 Final Project Milestone Four: Did not get any feed back as yet but go ahead and use the information on this paper
Final Submission: Memorandum With Appendix In Module Nine, you will complete all necessary tax forms according to Section III of the critical elements. You will then submit a comprehensive memorandum
TAX 655 Final Project Guidelines and Rubric Overview The final project for this course is the creation of a memorandum with an a ppendix of supporting IRS forms and schedules . Working as an accounting associate in a financial organization requires the ability to apply accounting knowledge in unique ways. Being able to identify issues and communicate them effectively with members of your team and clients is essential for any fina ncial career working in a privately held enterprise or working with privately held clients. In the final project , you will demonstrate your ability to communicate your tax efficient investment and business strategy recommendations to a client. Your propo sed strategy could save the client and his family millions of dollars over time, so it is imperative that you utilize your ta x research skills and maintain compliance with all governing rules and regulations. The project is divided into four milestones , which will be submitted at various points throughout the course to scaffold learning and ensure quality final submissions. These milestones will be submitted in Modules Two , F our , Five , and Seven . The comprehensive memorandum with appendix will be submit ted in Module Nine . The project will address the following course outcomes:  Recommend appropriate taxable entities, based on comprehensive tax research, for new businesses resulting in optimum solution s that meet clients’ desired economic outcomes  Evalua te tax consequences between liquidating and non -liquidating corporate distributions for identifying their impact on clients’ tax returns consistent with governing rules and regulations  Apply best practices in accounting and moral reasoning for liquidating a business resulting in the best economic solution for the owner  Illustrate solutions for addressing tax consequences resulting from gifts and inheritances, while maintaining compliance with governing rules and regulations  Prepare appropriate tax returns as they apply to various business entities that result in the best economic solution for clients Prompt You are working as an accountant at a mid -size CPA firm. One of your clients is Bob Jones. Bob’s personal information is as follows: DOB: Oct ober 10, 1952 SSN: 444 -00 -4444 Marital Status: Single Home Address : 5100 Lakeshore Drive, Pensacola, FL 32502 Bob has a very successful used car business located at 210 Ocean View Drive in Pensacola, Florida. Last year, you filed a Schedule C for Bob that had $1,200,000 in taxable income. The business will have an income growth rate of 10% per year over the next several years . Bob’s personal wealth, including investments in land, stocks, and bonds, is about $14,000,000. Last year, he reported interest income of $20,000 and dividend income of $6,000. The $14,000,000 includes land worth $9,000,000 that Bob bought in 1966 for $450,000. The stocks and bonds have a tax basis of $1,200,000 and they are currently worth $5,000,000. All of the investments have been ow ned for more than a year. In addition to his investments, Bob paid $140,000 for his home in 1972 and it is now worth $600,000. The used car business is currently valued at $53,000,000 including the land and building, which are worth $41,000,000. Bob’s tax basis in the land and building is $2,000,000 and $400,000, respectively. The inventory is worth $12,000,000, with a cost basis of $5,000,000 ; the remaining assets, which include office furniture and equipment, make up the remainder of the business’s total value. The office furniture and equipment are fully depreciated. Bob wants your professional advice regarding whether he should continue to operate as a sole proprietor or convert the busine ss to a partnership , an S corporation , or a C corporation . Based on one of the business entities selected, Bob wants to include Mandy —his daughter —in the business as an owner and manager with a possibility of 40% interest. One of his concerns is what would happen to his business after he passes away. Mandy’s p ersonal tax information is as follows: Mandy Jones DOB: June 30, 1990 SSN: 999 -99 -9999 Marital Status: Single Home Address: 5990 Langley Road, Pensacola, FL 35203 You will need to describe the tax and limited liability effects on a chosen business entity should Bob decide to reduce the amount of tax paid per year, as well as the protection of personal assets should there be a possible claim against the company’s assets. Prepare a memorandum to the client, recommending a type of business entity, including an appendix of supporting IRS tax schedules and forms. Specifically, the following critical elements must be addressed: I. Memorandum A. Us e logical reasoning based on your tax research to explain why the client should choose your recommended business entity . Consider referencing appropriate tax code and regulation s. B. Defend your business entity recommendation by describing the accounting method . Consider the advantages and disadvantages of the business entity based on the following : 1. Cash basis vs. accr ual 2. The cost to prep the returns 3. The tax benefits 4. The limited liability protection 5. Employee benefits C. Interpret the tax law pertaining to the type of business recommended and justify your recommendation using details consistent with tax law, code, and regu lations. D. Explain the tax effect based on providing $180,000 per year for the client’s salary and $70,000 per year for his daughter’s salary if they withdraw cash from the business or pay dividends as appropriate. E. Justify the percentage of ownership the cl ient’s daughter should have in the business based on the type of business entity recommended. Consider the tax law in reference to the recommendation and how the decision will affect the daughter’s tax return. F. Create a detailed tax planning proposal expla ining how the client’s family can experience tax savings should the client pass away. Cite relevant governing rules and regulations. G. Illustrate a strategic plan that addresses the need for a will in handling the estate. Detail what happens to the business, land, and investment s consistent with tax codes and regulations. Consider extending the plan to address the client’s estate tax, trust, and charita ble contribu tio ns while minimizing estate tax. H. Recommend estate planning strategies consistent with tax codes and regulations for the purpose of reducing the taxable estate. Be sure to include gifting prop erty to heirs in your response. I. Illustrate the best course of action if the client decides to leave the business in three years. Provide some advice to him should he decide to gift the business to his daughter or transfer the assets or common stock to her, depending on the bus iness entit y you have selected. J. Illustrate the best course of action if the client wishes to sell the business . Consider the tax consequences with regard to capital gains and losses, ordinary income issues, and selling an existing operating business. II. Conclusion A. Com pare and contrast the advantages and disadvantages of the sole proprietorship, the partnership, the S corporation , and the C corporation as a tax vehicle that could meet the client’s need for accounting information about the business. Consider providing ju stification for why the client would not necessarily choose the other business entities. B. Summarize the alternative involving the possibility of liquidating the business using rationale based on tax research, code s, and regulation s. C. Summarize the alternat ive of transferring the business activity , providing justification based on tax research, code s, and regulation s. III. Appendix : To further justify your professional advice regarding whether the client should continue to operate as a sole proprietor or convert the business to a partnership , an S corporation , or a C corporation , complete the appropriate tax schedules using the most current tax forms for the requirements below. A. Prepare Bob’s Form 1040 with the appropriate tax schedules and Mandy’s Form 1040 (based on the salary he wanted to pay her , $70,000 per year ). Assume that you are filing the tax returns using sole proprietorship for the business entity and treating Mandy as an employee, regardless of your initial recommendation for this client. B. Prepare the appropriate forms in the event that the client decides to convert the business to a partnership , an S corporation , or a C cor poration based on your recommendation. Also, include the tax effect, if any, of the money that the client and his daughter are taking from the business for their personal expenses. Include t he owner s’ personal 1040 forms as well. C. Justify your recommendati on using schedules and tax forms you completed by explaining how the forms and schedules result in the best economic solution for the client consistent with IRS code and regulations. Milestones Milestone One : Business Entity , A ccounting M ethod , and Tax Laws In Module Two , you will submit a draft of your recommendation for the business entity you believe will meet the client’s needs , based on your research. You will also select the accounting method that should be used to interpret the business transactio ns and for tax reporting. You will also need to summarize the tax law pertaining to the entity selected. This assignment will address Section I , Parts A, B , and C of the critical elements above. This milestone is graded with the Milestone One Rubric. Milestone Two : Tax Effects and O wnership Interest In Module Four , you will submit a draft explaining the tax effects of s alaries if cash is withdrawn from a business. You must also explain the tax consequences of paying the owners based on the selected business entity , as well as the tax consequences for each individual’s personal tax returns. This assignment will address Section I, Parts D and E of the critical elements . This milestone is graded with the Milestone Two Rubric. Milestone Th ree: Strategic Planning , Gift Taxes , and Disposing of a Business In Module Five , you will submit a draft of your tax planning proposal and strategic plan recommendation regarding the client’s estate . You must also address the tax effects of selling the business prior to the death of the founder . This assignment will address Section I, Parts F through J of the critical elements . This milestone is graded with the Milestone T hree Rubric. Milestone Four: Conclusion In Module Seven , you will submit a draft of your conclusion. You will compare and contrast the advantages of each type of business entity that the client may select , summarize the alternative involving the possibility of liquidating the business using rationale, and, finally, summarize th e alter native of transferring the business activity providing justification based on tax research, code, and regulation s. This assignment will address Section II of the critical elements . This milestone is graded with the Milestone Four Rubric. Final Submission: Memorandum With Appendix In Module Nine , you will complete all necessary tax forms according to Section III of the critical elements . You will then submit a comprehensive memorandum to the client that covers all critical elements and includes an appendix of IRS tax forms and schedules necessary to support your advice. You may also submit tax forms and schedules to illustrate the tax effects of continuing to operate the business as a sole proprietorship. The final submission should be a complete document containing all of the critical elements of the final pro ject . Feedback gained during the course should be reflected in your final submission. This submission will be graded using the Final Pro ject Rubric. Note: The textbook includes tax return fo rms for the prior year in the appendix because of publishing deadlines. Use the most current tax forms to arrive at your answers. Deliverables Milestone Deliverable Module Due Grading One Business Entity, Accounting Method, and Tax Laws Two Graded separately; Milestone One Rubric Two Tax Effects and Ownership Interest Four Graded separately; Milestone Two R ubric Three Strategic Planning, Gift Taxes , and Disposing of a Business Five Graded separately; Milestone Three Rubric Four Conclusion Seven Graded separately; Milestone Four Rubric Final Submission: Memorandum With Appendix Nine Graded separately; Final Project Rubric Final Project Rubric Guideline s for Submission : Submit your memorandum with standard formatting: 7 –10 pages, double -spaced, in APA format, with one -inch margins, 12 -poin t Times New Roman font, and an a ppendix containing electronic versions of the appropriate IRS tax schedules and forms. Critical Elements Exemplary Proficient Needs Improvement Not Evident Value Memo: Business Entity Meets “Proficient” criteria and references appropriate tax code and regulations in justification (100%) Explains why the recommended entity is the most appropriate choice using logical reasoning (90%) Explains why the recommended entity is the most appropriate choice but details either lack relevance or are cursory (70%) Does not explain why the recommended entity is the most appropriate choice (0%) 6 Memo: Accounting Method Meets “Proficient” criteria and details cover the advantages and disadvantages (100%) Defends the decision to choose the recommended entity by describing the accounting method (90%) Defends the decision to choose the recommended entity but details are inaccurate or cursory (70%) Does not defend the decision to choose the recommended entity (0%) 6 Memo: Tax Law Meets “Proficient” criteria and details illustrate versatility of thought when using tax law, code, and regulations (100%) Interprets tax law pertaining to the selected business entity using tax law, code, and regulations as justification (90%) Interprets and justifies tax law pertaining to the selected business entity but details are either inaccurate or irrelevant (70%) Does not interpret and justify tax law pertaining to the selected business entity (0%) 6 Memo: Tax Effect on Cash Withdrawals or Dividends Meets “Proficient” criteria and provides, in detail, more than one option (100%) Explains the tax effect based on providing the client and his daughter salaries if they withdraw cash from the company or pay dividends (90%) Explains the tax effect based on providing the client and his daughter salaries but details are inaccurate or cursory (70%) Does not explain the ta x effect based on providing the client and his daughter salaries (0%) 6 Memo: Percentage of Ownership Meets “Proficient” criteria and details explain how the decision will affect the client’s daughter’s tax return (100%) Justifies the percentage of ownership the client’s daughter should have based on the business recommended (90%) Justifies the percentage of ownership the client’s daughter should have but details are irrelevant or cursory (70%) Does not justify the percentage of ownership the client’ s daughter should have (0%) 6 Memo: Tax Planning Proposal Meets “Proficient” criteria and details include relevant governing rules and regulations (100%) Creates a tax planning proposal explaining how the family can experience tax savings should the client pass away (90%) Creates a tax planning proposal but details are inaccurate or irrelevant (70%) Does not create a tax planning proposal (0%) 6 Memo: Strategic Plan Meets “Proficient” criteria and extends the plan to address the estate tax, trust , and charitable contributions while minimizing inheritance tax (100%) Illustrates a strategic plan that addresses the need for a will in handling the estate , which includes the business, land , and investments , consistent with governing code and regulations (90%) Illustrates a strategic plan that addresses the need for a will , but details lack coverage of business, land , or investments or are not consistent with governing code and regulations (70%) Does not illustrate a strategic plan that addresses the need for a will (0%) 6 Memo: Estate Planning Strategies Meets “Proficient” criteria and details exemplify gift -giving strategies that reduce the taxable estate (100%) Recommends estate planning strategies consistent with governing code and regulations , including gifting property to heirs (90%) Recommends estate planning strategies but details are inaccurate or cursory (70%) Does not recommend estate planning strategies (0%) 6 Memo: Gift or Transfer the Assets Meets “Proficient” criteria and provides justification of both the gifting and transferring of assets (100%) Illustrates the best course of action the client should take including advice on gifting or transferring assets if he leaves the business in three years (90%) Illustrates a course of action the client should take if he leaves the business in three years but details are either inaccurate or irrelevant (70%) Does not illustrate the best course of action the client should take if he leaves the business in three years (0%) 6 Memo: Sell the Business Meets “Proficient” criteria and addresses ordinary income issues, and capital gains and losses consistent with tax code and regulations (100%) Illustrates the best course of action if the client wishes to sell the business and includes tax consequences when selling an existing operating business (90%) Illustrates a course of action if the client wishes to sell the business, but details are inaccurate or cursory (70%) Does not illustrate a course of action if the client wishes to sell the business (0%) 6 Conclusion: Advantages and Disadvantages Meets “Proficient” criteria and shows keen insight into the advantages and disadvantages of choosing the other business entities (100%) Compares and contrasts advantages and disadvantages of all the business entities as tax vehicles to meet the client’s need s (90%) Compares and contrasts advantages and disadvantages of all the business entities but details are either incomplete or inaccurate (70%) Does not compare and contrast advantages and disadvantages of all the business entities (0%) 6 Conclusion: Liquidating the Business Meets “Proficient” criteria and is written in an appropriate voice for the target audience (100%) Summarizes the alternative choice involving liquidating the business , using tax research , governing rules , and regulation s (90%) Summarizes the alternative choice involving liquidating the business but details are either unclear for target audience or curs ory (70%) Does not summarize the alternative choice involving liquidating the business (0%) 6 Conclusion: Transferring the Business Activity Meets “Proficient” criteria and is written in an appropriate voice for the target audience (100%) Summarizes the alternative choice involving transferring the busine ss activity using tax research , governing rules , and regulation s (90%) Summarizes the alternative choice involving transferring the business activity but details are either unclear or cursory (70%) Does not summarize the alternative choice involving transferring the business activity (0%) 6 Appendix: Form 1040 and Tax Schedule s Prepares the appropriate page s of Form 1040 and the tax schedule s accurately and completely based on the sole proprietorship business entity (100%) Prepares the appropriate page s of Form 1040 and tax schedule s based on the sole proprietorship business entity but details are either incomplete or inaccurate (70%) Does not complete th e appropriate page s of Form 1040 based on the sole proprietorship business entity (0%) 6 Appendix: Forms to Convert the Business Prepares the appropriate remaining forms for a partnership , S corporation , or C corporation accurately and completely (100%) Prepares the appropriate remaining forms for a partnership , S corporation , or C corporation but details are incomplete or inaccurate (70%) Does not prepare the appropriate remaining forms (0%) 6 Appendix: Justification of Schedules and Tax Forms Meets “Proficient” criteria and references relevant IRS code and regulations (100%) Justifies the selected schedules and tax forms by explain ing how the schedules and forms result in the best economic solution for the client (90%) Justifies the selection of the schedules and tax forms but details are either inaccurate or cursory (70%) Does not justify the selection of the schedules and tax forms (0%) 6 Articulation of Response Submission is free of errors related to citations, grammar, spelling, syntax, and organization and is presented in a professional and easy -to- read format (100%) Submission has no major errors related to citations, grammar, spelling, syntax, or organization (90%) Submission has major errors related to citations, grammar, spelling, syntax , or organization that negatively impact readability and artic ulation of main ideas (70%) Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas (0%) 4 Total 100%
Final Submission: Memorandum With Appendix In Module Nine, you will complete all necessary tax forms according to Section III of the critical elements. You will then submit a comprehensive memorandum
Running head: Business Entity, Accounting Method, and Tax Laws 0 Milestone One – 2-1 Final Project: Business Entity, Accounting Method, and Tax LawsName – Yvonne Saunders-BatchueInstitution – Southern New Hampshire UniversityJune 04, 2019 Abstract This paper will select the accounting method that should be used to interpret the business transactions and for tax reporting. It will also summarize the tax law that pertains to the entity selected. S corporations Business Entity An S corporation is generally a business entity that offers most tax advantages while still preserving your ownership flexibility. An S corporation also called the subchapter, or small business corporation is a tax code that was enacted into law by Congress in 1958. The S corporation was created to encourage and support creating small and family businesses, while eliminating the double taxation that conventional corporations are subjected to. Considering the nature of Bob’s activities, it is recommendable for Bob to form an S corporation. S corporation comprises the different attractive tax reductions and still supplies the entrepreneur with a decrease in liability from the company (Jones & Rhoades-Catanach, 2013). Following an S corporation, the profits, and losses from the business are reassigned to the shareholders. Accordingly, Bob would not be required to tolerate the whole taxation obligations and failures experienced in the company itself. Besides, an S corporation is suited for businesses with a few shareholders who are applicable in this case with Bob and the daughter being the principal shareholders. Accounting Method Bob is encouraged to utilize S corporation, as his type of business does not have stock, which makes it proper and more comfortable to use the cash accounting method for which is more straightforward, contrasted with the accrual accounting technique (Schenk, 2015). The cash accounting technique only accounts for incomes that were received and expenses that have been paid out; this makes it possible for the company to create tax savings based on what has been received by the company and what has been paid out (Jones & Rhoades-Catanach, 2013). Since the wages are subjected to the FICA taxes with a 13.3 % income tax rate and a maximum of 15 % tax rate on capital gains tax compared to a lump sum 35% ordinary income tax (Schenk, 2015), the owner has to pay themselves a salary commensurate to the fair value compensation for the market while additional income such as a capital gains income, are accounted for. In the case of tax savings, due to the presence of the Social Security and Medicare taxes, the corporation does not have to pay taxes on dividends; rather, the high amount of distributions means a less tax obligation on the Social Security and Medicare taxes. The pass-through method of taxation reduces the chances of double taxation because of the deliveries to the shareholders and not the owners (Schenk, 2015). Regardless of the tax savings and limited liability, S corporation have a few shortcomings. Case in point, they are liable to various legal requirements, which must be followed, and therefore, it infers higher legal and expenses administration costs. In as much there is a limited liability, the owners are personally responsible for any negligence. They are required to document the articles of consolidation and hold general shareholders gatherings. These costs are, however, lower than that of C corporations (Schenk, 2015). For example, while C corporation is liable to file returns quarterly, S corporations are required to make annual filings. There will also be the presence of additional expenses, such as worker’s compensation and unemployment insurance coverage for each employee. Another disadvantage is the issue of rigid profit allocations. For instance, the founder’s distribution can only be 50%. The profits and losses are also apportioned according to the proportion of shares that are held (Jones & Rhoades-Catanach, 2013). Irrespective of the tax savings and limited liability, S corporation have a few shortcomings. The situation in point, they are accountable to many legal requirements, which must be followed, and therefore, it infers higher valid and expenses administration costs. In as much there is a limited liability, the owners are personally accountable for any carelessness. They are required to document the articles of consolidation and hold general shareholders gatherings. These costs are, however, lower than that of C corporations (Schenk, 2015). For example, while C Corporation is liable to file returns quarterly, S corporations are required to make annual filings. There will also be the existence of extra expenses, such as worker’s compensation and unemployment insurance coverage for each employee. Another disadvantage is the issue of inflexible profit distributions. For instance, the founder’s distribution can only be 50%. The profits and losses can also be distributed according to the proportion of shares that are held (Jones & Rhoades-Catanach, 2013). In the future, if the business grows, it is easier for the industry to convert into a c corporation. Tax law The shareholders of the S corporations report the incomes and losses of their corporation in their tax returns. While an S corporation is not taxed on its profits, the owners of an S corporation are taxed on their proportional shares of the S corporation’s profits. Bob will be required to file IRS form 2553 and form 1120S U.S. salary assessment form for S corporation. The Form 1120-S documents the business incomes and expenses. The K- I schedule reports the amount that should be recorded by the shareholder’s income tax returns (Jones & Rhoades-Catanach, 2013). References: Article Title What is an S corporation and How to Form One | S corporations | Benefits of an S corporation, Document Filing Services, https://www.incfile.com/what-is-s-corporation/ June 01, 2019 Schenk, D. H., (2015). Federal Taxation of S corporations. Law Journal Press. Shay, S. E., (2014). Theory, Complications, and Policy: Daniel Shaviro’s Fixing U.S. International Taxation. Jerusalem Review of Legal Studies, jlt037. S corporation – Wikipedia. https://en.wikipedia.org/wiki/S_corporation
Final Submission: Memorandum With Appendix In Module Nine, you will complete all necessary tax forms according to Section III of the critical elements. You will then submit a comprehensive memorandum
Running head: Tax Effects and Ownership Interest 0 Milestone Two Final Project: Tax Effects and Ownership Interest Name – Yvonne Saunders-Batchue Institution – Southern New Hampshire University June 20, 2019 Memorandum ______________________________________________________________________________ Title: Tax Effects and Ownership Interest Requested By: Mr. Bob Jones Submitted By: Yvonne Saunders-Batchue Date Submitted: June 20, 2019 FACTS: Bob owns a successful used car business, located at 210 Ocean View Drive in Pensacola, Florida. The company will have an income growth rate of 10% per year over the next several years. Bob’s wealth including investments in land, stocks, and bonds, is about $14,000,000. The business valued $53,000,000, including the land and building. The client’s, salary is $180,000 per year and $70,000 per year for his daughter Mandy’s salary. Bob desires to embrace his daughter in the business as a proprietor by transferring 40% of the company to her. Questions and Answers: (D) Explain the tax effect of providing $180,000 per year for the client’s salary and $70,000 per year for his daughter’s salary if they withdraw cash from the business or pay dividends as appropriate. Under Sec. 1368, an S corporation’s distribution of cash or property may bear three possible tax consequences to the recipient shareholder, a tax-free reduction of the shareholder’s basis in the corporation’s stock (Nitti, 2014). 1. Taxable dividend 2. Gain from the sale of the stock (generally resulting in capital gain). 3. These options are not mutually exclusive; a single distribution may result in two or even all three of those consequences. The amount $180,000 should be divided to pay both the salaries and the dividends because the amount is what the business entity is liable for being that it benefits from the services rendered to it by the workers. Again, it is the amount that the government is fully aware of based on the financial audit that is done on companies. It is what the company files to be accountable for all its transactions. However, the daughter will continue to earn her salary of $ 70,000 without paying the taxes because based on the federal tax requirement, her salary (income) is much lower in the income tax bracket than that found in the company. It gives her an advantage to receive the salary without being taxed as the entity she works for has already been taxed. Her tax, therefore, is already covered in that paid by the company she works for. She will continue to have her salary that is considered reasonable because various tax schemes that are used are from the IRS form 2553 and or 1120 of the S Corporation. (E) Justify the percentage of ownership the client’s daughter should have in the company in the type of business entity recommended. Consider the tax law about the recommendation and how the decision will affect the daughter’s tax return. Following the policies and stature of the company, it is evident that the percentage ownership will just be retained at 40%. It automatically implies that the salary that it offers its clients should be reasonable then, as in most cases, it will tend to protect its workers from the sole proprietorship tax. References: Determining the Taxability of S Corporation Distributions …. https://www.thetaxadviser.com/issues/2014/jan/nitti-jan2014.htmlI, By Tony Nitti, CPA, MST, January 1, 2014, IRS. (n.d.). S Corporations. Retrieved from IRS: https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation Determining the Taxability of S Corporation Distributions …. https://www.thetaxadviser.com/issues/2014/jan/nitti-jan2014.html
Final Submission: Memorandum With Appendix In Module Nine, you will complete all necessary tax forms according to Section III of the critical elements. You will then submit a comprehensive memorandum
Strategic Planning, Gift Taxes, and Disposing of a Business Milestone Three Final Project: Strategic Planning, Gift Taxes, and Disposing of a Business Name – Yvonne Saunders-Batchue Institution – Southern New Hampshire University June 29, 2019 Memorandum ______________________________________________________________________________ Title: Strategic Planning, Gift Taxes, and Disposing of a Business Requested By: Mr. Bob Jones Submitted By: Yvonne Saunders-Batchue Date Submitted: June 29, 2019 ______________________________________________________________________________ FACTS: Bob has a very successful used car business located at 210 Ocean View Drive in Pensacola, Florida. Last year, you filed a Schedule C for Bob that had $1,200,000 in taxable income. The business will have an income growth rate of 10% per year over the next several years. Bob’s personal wealth, including investments in land, stocks, and bonds, is about $14,000,000. Last year, he reported interest income of $20,000 and dividend income of $6,000. The $14,000,000 includes land worth $9,000,000 that Bob bought in 1966 for $450,000. The stocks and bonds have a tax basis of $1,200,000 and they are currently worth $5,000,000. All of the investments have been owned for more than a year. In addition to his investments, Bob paid $140,000 for his home in 1972 and it is now worth $600,000. The used car business is currently valued at $53,000,000 including the land and building, which are worth $41,000,000. Bob’s tax basis in the land and building is $2,000,000 and $400,000, respectively. The inventory is worth $12,000,000, with a cost basis of $5,000,000; the remaining assets, which include office furniture and equipment, make up the remainder of the business’s total value. The office furniture and equipment are fully depreciated. Questions and Answers: F. Create a detailed tax planning proposal explaining how the client’s family can experience tax savings should the client pass away. Cite relevant governing rules and regulations. When business owners die, they want their estates to pass on to their children or family members. However, they do not want them to pay any inheritance tax (IHT) as this would reduce the total amount of estate that the family ends up within their pockets. There are various strategies which can be employed to help Bob’s family to reduce the amount of tax going to the taxmen before the family gets its share. These strategies guide on how inheritance tax can be saved. First, the Bob should put the assets owned into trust before death. Setting up a trust will make the assets in the sizeable estate look like it no longer belongs to the family (Kess & Westlin, 2001). Assets within a trust in clients’ estate do not form part of the clients’ estate when they die. This way, inheritance tax is avoided by the family, saving a good amount that would have been passed to the taxmen. Trust can be established in different ways. Irrevocable or permanent trust offers a lot of tax benefits. Assets put to this type of trust belong to the trust, and money is not subject to any estate taxes (Kess & Westlin, 2001). Trusts pay tax from sources like interests and dividends. This tax is very high for individuals; thus, trust reduces such taxes. Third, charity contributions have an impact on taxation. Contributions made by the client to charity from an estate will always be free of the inheritance tax liability (CTFA, 2019). A client could make use of charitable lead trusts (CLT). Through a CLT, a client transfers an estate’s asset to the trust, thus reducing the estate’s size and saving the estate’s tax. The trust does not, in turn, pay the income to the client but a charity for a certain number of years until the client dies (CTFA, 2019). After death, the asset is transferred to the family untaxed. In addition to CLT, the family can, after the client dies, experience tax savings by contributing to charity from the IHT. For example, if the family contributes 10% of its total inherited assets to charity, the remaining IHT rate on other remaining assets reduces from 40% to 36% (CTFA, 2019). All these strategies will help reduce the amount of taxes Bob’s family would pays if he passes away, ending up with better amounts in their pockets. G. Illustrate a strategic plan that addresses the need for a will in handling the estate. Detail what happens to the business, land, and investments consistent with tax codes and regulations. Consider extending the plan to address the client’s estate tax, trust, and charitable contributions while minimizing estate tax. Estate planning is a preparation for all tasks which will serve in the management of an individual’s asset base or estate in the event of the individual’s incapacitation. Most planning involves the bequest of a client’s assets to the desired heirs and tax settlement. Estate planning calls for strategies. Some of the strategic plans in handling an estate make a will a critical document that a client must have (CTFA, 2019). A will refers to a legal document that is created to give instructions on how a client’s property should be handled (CTFA, 2019). In the event of the death of Bob, there needs to be a plan on how the business will be owned, how land and investments will be shared, and how all tax codes should be consistent with the property left behind. One of the strategic plans that address the need for a will in handling the estate is planning who gets what share of a client’s estate, land, and investments. In the wealth distribution plan, a will is a necessary document in which the individuals to get what portion of land, investment, and estate are listed (Julius, 2019). Besides, through a will, a client can plan who executes all affairs regarding investments, land, estate, and any other related matters. Lastly, a will helps avoid conflicts resulting from children and family over the estate, land, and other investments when the client passes away. Another strategy is planning on what happens in case a client becomes incapacitated. That is, planning for the powers of Attorney. While creating a sound plan for the powers of Attorney in estate planning, a will can be essential in the event that a client dies (Julius, 2019). When a client intent that a will be a fundamental part of an estate plan, he/she is required to create the powers of Attorney in that will. The powers of Attorney stated in the will give a clear plan on which friend or relative can manage the client’s land and investment financial affairs in case the client is incapacitated (Julius, 2019). This makes the will an essential part document in estate strategic planning. Another strategy in strategic planning for estate management is creating trusts. Creating trusts involves getting out some of the estate assets to reduce tax expenses. In creating trusts, as one of the planning strategies, certain assets are set outside a client’s last will. This is to help prevent these assets from going through high taxation, reducing the client’s taxed income (Read & Bailey, 2015). Besides, the assets stated outside of the will do not go through the probate process, which is slow and expensive. As a client plans strategically for his estate, it is essential to include plans for revocable trusts, charitable contributions, and issues to do with tax. Through revocable tasks, the client states who would provide the benefits that the beneficiary would enjoy (Read & Bailey, 2015). The client may provide an income string for the other beneficiary after he/she dies. Trustees for holding assets in trusts may be required. An individual compliant for paying the estate tax should be named in the planning process (Read & Bailey, 2015). The amount for contribution to charity may be stated in the strategy, including which charity to contribute to, although with the aim of reducing tax on estate income. All these calls for a will in which the information is explained. H. Recommend estate planning strategies consistent with tax codes and regulations for the purpose of reducing the taxable estate. Be sure to include gifting property to heirs in your response. There exist various estate planning strategies that are consistent with tax codes and regulations that Bob can consider for reducing the taxable estate. The recommended strategies include: • Gifting property to heirs: this strategy offers a custodian for whoever inherits the estate to benefit. • Charitable transfers: lifetime transfers of some estate incomes to charities upon the client’s death helps reduce the estate’ size, thus reducing the estate taxes • Transfer to trusts: transfer some estate assets to irrevocable trusts to reduce the size of assets taxed in the estate while at the same time, creating very large proceeds like insurance proceeds away or outside from the firm. These proceeds are untaxable. Illustrate the best course of action if the client decides to leave the business in three years. Provide some advice to him should he decide to gift the business to his daughter or transfer the assets or common stock to her, depending on the business entity you have selected. The best course of action to advice Bob is to gift the business to his daughter in the event limited partnership from the family. The main reason is that gifting is a valuable estate planning strategy to help in transferring ownership of assets that are closely owned by the family to the coming generation (CTFA, 2019). It also takes care of the assets not to fall into the creditors’ hands. Another advantage is that its taxation will be done at lower rates for children. Thus, gifting is an excellent course of action. J. Illustrate the best course of action if the client wishes to sell the business. Consider the tax consequences concerning capital gains and losses, ordinary income issues, and selling an existing operating business. Selling is one right course of action if Bob wishes to sell the business. This is because Bob would be in a position to control all timings through the terms created in the deal. However, consequences will follow. First, the profit made from selling will be taxed (Wilde & Wilson, 2018). In conjunction to this, the amount that the client will pay will depend on whether the money earned by the client is taxed as either capital gains or just ordinary income (Wilde & Wilson, 2018). Lastly, the profits that the client will earn after selling the business assets may be taxed at the rate of capital gains.   References: Beebe, J. (2018). The estate tax after the 2017 Tax Act. Issue Brief, 4. CTFA, A. (2019). Estate planning strategies after tax reform. Journal of financial planning, 32(4), 20-22. Julius Giarmarco, J. D. (2017). The three levels of family business succession planning. Kess, S., & Westlin, B. (2001). CCH financial and estate planning guide. Commerce Clearing House. Read, D. W., & Bailey, W. A. (2015). A primer on teaching the law of wills, probate, and basic estate planning documents to business law students. Southern Journal of business and ethics, 7, 11-35. Wilde, J. H., & Wilson, R. J. (2018). Perspectives on corporate tax planning: observations from the past decade. The journal of the American taxation association, 40(2), 63-81.
Final Submission: Memorandum With Appendix In Module Nine, you will complete all necessary tax forms according to Section III of the critical elements. You will then submit a comprehensive memorandum
Running head: 7-2 FINAL PROJECT MILESTONE FOUR – CONCLUSION 0 7-2 Final Project Milestone Four: Conclusion Name: Yvonne Saunders Batchue Institution: Southern New Hampshire University July 8, 2019 A sole proprietorship is a type of business where the owner and the enterprise are inseparable. It means that the owner manages everything and decides all the activities in the firm. A partnership, on the other hand, is a type of business entity where friends or people with the same interest come together to transact business activities. They share management and profits based on the shares each person has. It is this that makes sole proprietorship to be advantageous over the partnership. According to Dungan (2017) decision-making process in a sole proprietorship is easier as the owner is the sole decision maker, unlike in partnership where the decision to be made has to be discussed and a lot of consultations done among the partners before any implementation made thus leading to time wastage and failure to make critical decisions when there is a vital need. Sole proprietorship allows maximum incentives of the business, unlike in partnership where there is a minimum incentive in the business due to communal ownership of the firm. A great sense of satisfaction and achievement is also achieved much easily with sole proprietorship than with partnership because of communal ownership which limits members to achieve more. The advantages that a partnership has over sole proprietorship are easy to raise startup capital, has high chances of borrowing because of security, easy chances of growth due to different ideas in management (Chadwick, 2018). The main disadvantage of a sole proprietorship over the partnership is that sole proprietorship has unlimited liability where the owner bears all the liabilities which at times can lead to the dissolution of the firm if the owner loses all their property. There is also the disadvantage of limited startup capital as all the funds come from the owner who also makes all the decision making them to have a limited managerial ability, thus limiting expansion and growth. Partnership, on the contrary, has sharing the liability as its main disadvantage as the mistake of a single partner is jointly shared by all. A corporation is an organization empowered by the state to transact business either as a group or as a company. There are two types of corporation the S and C corporations. An S corporation is a corporation that deals with a federal income tax that complies with the subchapter S of internal revenue code in chapter one. It is, therefore, the corporation that is allowed by the federal government not to pay any income tax. A C corporation, on the contrary, is a corporation that the federal income tax law mandates to pay its taxes separately from its owners. A C corporation is thus different from an S corporation in the way that they are taxed (Kumar, 2018). A C corporation pays tax while an S cooperation does not pay its tax; therefore, the best tax vehicle that a client should use for accounting information about a business is the C Corporation. The client would or should not use a sole proprietorship because it is always considered as an S corporation that does not pay its taxes or pay its tax singly making it costly for the owner. Payment of taxes ought to be felt at a personal level, and in partnership also, the taxes are paid as a group making it hard for a client to account for their taxes as mandated by the law. Business liquidation is the process by which a business enterprise’s life is brought to an end, and all its assets distributed to its claimants when the company becomes insolvent. The option that a firm has for it is not to be liquidated is to be financially stable and continue to pay its taxes. It is through the taxation process that a company can be rendered insolvent or not and then liquidated. The process of its liquidation can come in three different ways. The first way would be through the creditors’ voluntary liquidation (CVL) where the company is bankrupt and cannot, therefore, pay its debts (Wainer, 2015). Based on the law, the asset of such a company is sold to pay its creditors. Secondly, liquidation can be through members’ voluntary liquidation (MVL) where all the shareholders agree to dissolve the business based on the best reasons suitable to them or bankruptcy. The last reason would be through the compulsory liquidation that the government’s judiciary is involved in dissolving the company. Business organizations are always formed to achieve set objectives and missions. At times the missions that they are to attain are met, and the firm can either choose to transact new business activities, start all over again or end its operations. If the company decides to transfer its activities, it will imply bringing on board new members or changing its operation, which can be done in four ways. The first way would be through adding new partners. It thus would mandate that the company opens its membership to applicants who have the same business objectives to join for it to continue (Kumar, 2016). It always comes in case some members retire or dies, or the business objectives are changed. Secondly, transfer of business activities would be through the sale of the business enterprise; it would mean that the buyer would either choose to continue with the same business line or introduce new ones. The third means of transferring business activity is through a lease purchase. Here, the lessee is given full rights to manage the company for an agreed period and during the period decides to the activities they will transact. The last way of transferring business activities is through family member transfer. It is a scheme that is typically used to avoid payment of estate taxes. In a sole proprietorship, one owns the company and therefore cannot sell the company to settle the dues. In the case of debts, only the assets are sold to settle them hence is not easy to transfer its activities. A partnership, on the contrary, is a situation where the ownership of the firm is shared, and therefore when there is a need of transfer, all the partners must give their views, and if need be, an operating agreement can be signed (Kumar, 2016). While in a C corporation, the ownership is based on the number of shares that one has made the percentages to change frequently in the public corporation as they are linked to the stock markets. In the private corporation, however, the transfer of the shares is done/sold and resold only once a year, making it difficult to change or sell them frequently. As in C corporations, S corporations transact in the same way only that all expenses and incomes are given to the owners without taxation at the company level (Kumar, 2016). Again, its owners cannot exceed 100 if it exceeds, it automatically changes to a C corporation therefore at all times the share that is open for sale or transfer is of the members who have exited through retirement or death. The numbers must always be maintained at 100 members. It is for these reasons that various bylaws govern the qualifications for one to be a member of the organization. It is through these policies that the number is always slimmed to be at 100 all the times. Reference: Dungan, A. (2017). Sole Proprietorship Returns, Tax Year 2015. Statistics of Income. SOI Bulletin, 37(2), 2-28. Chadwick, W. (2018). Significant others: creativity & intimate partnership. Thames & Hudson. Kumar, M. (2018). The Persistent Appeal of S Corporations: How Tax Cuts Might Not Help Small Corporations. Michigan Business & Entrepreneurial Law Review, 8(1), 133-150. Wainer, H. (2015). The insolvency conundrum in the Companies Act. South African Law Journal, 132(3), 509-517. Kumar, A. (2016). State holding companies and public enterprises in transition. Springer.

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