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Milestone One: Business Entity, Accounting Method, and Tax Laws I. Memorandum

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 transactions 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.

    1. A. Use logical reasoning based on your tax research to explain why the client should choose your recommended business entity. Consider referencing appropriate tax code and regulations.
  1. 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. accrual
  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 regulations.


TAX 655 Final Project Guidelines and Rubric Overview The final project for this course is the creation of a memorandum with an appendix 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 financial 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 proposed strategy could save the client and his family millions of dollars over time, so it is imperative that you utilize your tax 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, Four, Five, and Seven. The comprehensive memorandum with appendix will be submitted 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 solutions that meet clients’ desired economic outcomes Evaluate 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
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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: October 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 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. Bob wants your professional advice regarding whether he should continue to operate as a sole proprietor or convert the business 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 personal 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.
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TAX 655 Milestone One Guidelines and Rubric You will submit a draft of your recommendation for the business entity that 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 transactions and for tax reporting. You will also summarize the tax law pertaining to the entity selected. This assignment will address Section I, Parts A, B, and C of the critical elements of the final project. Specifically, the following critical elements must be addressed: I. Memorandum A. Use logical reasoning based on your tax research to explain why the client should choose your recommended business entity . Consider referencing appropriate tax code and regulations. 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. accrual 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 regulations. Guidelines for Submission: Your paper must be submitted as a 1–2-page Microsoft Word document with double spacing, 12-point Times New Roman font, one- inch margins, and at least three sources cited in APA format. Instructor Feedback: This activity uses an integrated rubric in Blackboard. Students can view instructor feedback in the Grade Center. For more information, review these instructions . Critical Elements Proficient (100%) Needs Improvement (75%) Not Evident (0%) Value Memo: Business Entity Explains why the recommended entity is the most appropriate choice using logical reasoning Explains why the recommended entity is the most appropriate choice but details either lack relevance or are cursory Does not explain why the recommended entity is the most appropriate choice 25 Memo: Accounting Method Defends the decision to choose the recommended entity by describing the accounting method Defends the decision to choose the recommended entity but details are inaccurate or cursory Does not defend the decision to choose the recommended entity 25
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Memo: Tax Law Interprets tax law pertaining to the selected business entity using tax law, code, and regulations as justification Interprets and justifies tax law pertaining to the selected business entity but details are either inaccurate or irrelevant Does not interpret and justify tax law pertaining to the selected business entity 25 Articulation of Response Submission has no major errors related to citations, grammar, spelling, syntax, or organization Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas 25 Total 100%
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Subject: Accounting, Business

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