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Final Project: Memorandum with Appendix
Final Project: Memorandum with Appendix
Katie Merritt
Southern New Hampshire University
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Final Project: Memorandum with Appendix
Memo
To:
Bob Jones
From:
Katie Merritt
Date:
February 15, 2019
Re:
Tax Computations and Advice
Based on the information I have received I would calculate the Total Gross Income to be:
Capital Gain from Sale of Land:
$8,550,000.00
Estimated Sales from new Business:
$300,000.00
Interest Income (based on ly):
$20,000.00
Dividends (based on ly):
$6,000.00
Total Gross Income:
$8,876,000.00
I am going to give you the calculation of the property disposition capital gains.
Please take a
look at the numbers and then I will go into my discussion.
Disposable Property Capital Gains:
(FMV) Sale of the Land
$9,000,000.00
(-) minus Selling Expenses
$500,000.00
= Taxable Sale of the Land
$8,500,000.00
(-) minus Cost Basis
$450,000.00
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Final Project: Memorandum with Appendix
= Total Capital Gain
$8,050,000.00
Business Entity
: A partnership and a S corporation for the most part are not treated as a
separate tax element. Instead, they are conduits through which income, deductions, losses, and
credits pass to the owners' tax returns. In any case, the corporation can elect S election and be
treated as a pass through element (Anderson, Pope, and Rupert, 2016.) §1361of the Internal
Revenue Code (IRC) the corporation must meet qualification requirements to convert to a S
corporation (IRC, §1361, 2016.) Therefore, so as to elect s corporation status Bob, you should
document IRS S Corp structure 2553 (Incorporate.com, 2016.) S corporation has two primary
reasons for electing S corporation, to stay away from twofold taxation on distributions, and the
second is to enable corporate losses to move through to the shareholders. Be that as it may, one
must also include constrained obligation to the shareholders, as well as free transferability or sale
of interest; stocks in the corporation (Small Business Encyclopedia, 2016.) S corporations are
responsible for tax on certain inherent gains and passive income.
The tax law imposes no restrictions to the number or types of entities that can claim
interests in a partnership or stock in a C corporation. Notwithstanding, S corporation
shareholders just can be individuals who are U.S. citizens or residents, certain trusts, estates, and
qualifying tax absolved organizations, and the quantity of shareholders is constrained to 100.
This standard is much less restrictive than in the past because members of a family are presently
counted as a single shareholder for purposes of the 100 shareholder limit (Anderson, Pope, and
Rupert, 2016.) I trust it is to your greatest advantage to use S Corporation as your business
substance. Be that as it may, I must share with you that a shareholder's stock and obligation basis
in the S corporation is vital. As a shareholder, your stock as well as obligation basis will fluctuate
contingent upon the S corporation's operations. Hence, for both you and your little girl, the
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Final Project: Memorandum with Appendix
taxable measure of a distribution is contingent on your stock basis (IRS, 2016.) If you don't plan
