Question 1
Prentice Halls Federal Taxation 2010: Corporations, Partnerships, Estates and Trusts, 23e ISBN: 9780136112020 C:3-64 TAX FORM/RETURN PREPARATION PROBLEM Knoxville Musical Sales, Inc. is located at 5500 Kingston Pike, Knoxville, TN 37919. The corporation uses the calendar year and accrual basis for both book and tax purposes. It is engaged in the sale of musical instruments with an employer identification number (EIN) of 75-2010008. The company incorporated on December 31, 2004, and began business on January 2, 2005. Table C:3-3 contains balance sheet information at January 1, 2008, and December 31, 2008. Table C:3-4 presents an income statement for 2008. These schedules are presented on a book basis. Other information follows. Estimated Tax Payments (Form 2220): The corporation deposited estimated tax payments as follows: April 15, 2008 $105,000 June 16, 2008 (June 15 fell on a Sunday) 216,000 September 15, 2008 253,000 December 15, 2008 253,000 Total 827,000 Taxable income in 2007 was $1,700,000, and the 2007 tax was $578,000. The corporation earned its 2008 taxable income evenly throughout the year. Therefore, it does not use the annualization or seasonal methods. Inventory and Cost of Goods Sold (Schedule A): The corporation uses the periodic inventory method and prices its inventory using the lower of FIFO cost or market. Only beginning inventory, ending inventory, and purchases should be reflected in Schedule A. No other costs or expenses are allocated to cost of goods sold. Note: the corporation is exempt from the uniform capitalization (UNICAP) rules because average gross income for the previous three years was less than $10 million. Knoxville Musical Sales, Inc.?Book Balance Sheet Information January 1, 2008 December 31, 2007 Account Debit Credit Debit Credit Cash $ 67,244 $ 99,845 Accounts receivable 427,248 496,800 Allowance for doubtful accounts $ 36,316 $ 42,228 Inventory 2,300,000 3,220,000 Investment in corporate stock 180,000 65,000 Investment in municipal bonds 30,000 30,000 Cash surrender value of insurance policy 20,000 34,000 Buildings 1,800,000 1,800,000 Accumulated depreciation?Buildings 90,000 126,000 Equipment 1,050,000 1,580,000 Accumulated depreciation?Equipment 175,000 207,333 Trucks 240,000 240,000 Accumulated depreciation?Trucks 72,000 120,000 Land 500,000 500,000 Deferred tax asset 15,305 14,732 Accounts payable 1,000,000 600,000 Notes payable (short-term) 500,000 400,000 Accrued payroll taxes 13,800 17,250 Accrued state income taxes 7,500 12,200 Accrued federal income taxes 112,449 Bonds payable (long-term) 1,800,000 1,400,000 Deferred tax liability 175,181 312,560 Capital stock?Common 920,000 920,000 Retain earnings?Unappropriated Totals $6,629,797 $6,629,797 $8,080,377 $8,080,377 1,840,000 3,810,357 Line 9 (a) Check (ii) (b), (c) & (d) Not applicable (e) & (f) No Compensation of Officers (Schedule E): Mary Travis 345-82-7091 100% 50% $270,000 John Willis 783-97-9105 100% 25% 164,000 Chris Parker 465-34-2245 100% 25% Total Bad Debts: For tax purposes, the corporation uses the direct writeoff method of deducting bad debts. For book purposes, the corporation uses an allowance for doubtful accounts. During 2008, the corporation charged $36,800 to the allowance account, such amount representing actual write-offs for 2008. Additional Information (Schedule K): 1 b Accrual 6-7 No 2 a 451140 8 Do not check box b Retail sales 9 Fill in the correct amount c Musical instruments 10 3 3-4 No 11 Do not check box 5 Yes 12 Not applicable 13 No Sales $ 9,200,000 Returns (230,000) Net sales $ 8,970,000 Beginning inventory $2,300,000 Purchases 5,060,000 Ending inventory (3,220,000) Cost of goods sold (4,140,000) Gross profit $ 4,830,000 Expenses: Amortization $ ?0? Depreciation 186,333 Repairs 19,136 General insurance 50,600 Net premium-Officers? life insurance 41,400 Officer?s compensation 598,000 Other salaries 368,000 Utilities 66,240 Advertising 44,160 Legal and accounting fees 46,000 Charitable contributions 27,600 Payroll tax 57,500 Interest expense 193,200 Bad debt expense 47,712 Total expenses (1,740,881) Gain on sale of equipment 120,000 Interest on municipal bonds 4,600 Dividend income 11,040 Net loss on stock sales (16,000) Net income before income taxes $ 3,208,759 Federal income tax expense (1,077,402) State income tax expense (69,000) Net income $ 2,062,357 Organizational Expenditures: The corporation incurred $6,500 of organizational expenditures on January 2, 2005. For book purposes, the corporation expensed the entire expenditure pursuant to Statement of Position 98-5. For tax purposes, the corporation elected under Sec. 248 to deduct $5,000 in 2005 and amortize the remaining $1,500 amount over 180 months, with a full month?s amortization taken for January 2005. The corporation reports this amortization in Part VI of Form 4562 and includes it in ?Other Deductions? on Form 1120, Line 26. Capital Gains and Losses: The corporation sold 100 shares of PDQ Corp. common stock on March 7, 2008, for $55,000. The corporation acquired the stock on December 15, 2007, for $65,000. The corporation also sold 75 shares of JSB Corp. common stock on September 17, 2008, for $44,000. The corporation acquired this stock on September 18, 2005, for $50,000. The corporation has a $7,500 capital loss carryover from 2007. Fixed Assets and Depreciation: For book purposes: The corporation uses straight-line depreciation over the useful lives of assets as follows: Store building, 50 years; Equipment, 15 years (old) and ten years (new); and Trucks, five years. The corporation takes a half-year?s depreciation in the year of acquisition and the year of disposition and assumes no salvage value. The book financial statements in Tables C:3-3 and C:3-4 reflect these calculations. For tax purposes: All assets are MACRS property as follows: Store building, 39-year nonresidential real property; Equipment, seven-year property; and Trucks, five-year property. The corporation acquired the store building for $1.8 million and placed it in service on January 2, 2005. The corporation acquired two pieces of equipment for $350,000 (Equipment 1) and $700,000 (Equipment 2) and placed them in service on January 2, 2005. The corporation acquired the trucks for $240,000 and placed them in service on July 18, 2006. The corporation did not make the expensing election under Sec. 179 on any property acquired before 2008. Accumulated tax depreciation through December 31, 2007, on these properties is as follows: Store building $136,602 Equipment 1 196,945 Equipment 2 393,890 Trucks 124,880 On November 16, 2008, the corporation sold for $400,000 Equipment 1 that originally cost $350,000 on January 2, 2005. The corporation had no Sec. 1231 losses from prior years. In a separate transaction on November 17, 2008, the corporation acquired and placed in service a piece of equipment costing $880,000. These two transactions do not qualify as a like-kind exchange under Reg. Sec. 1.1031(k)-1(a). The new equipment is seven-year property. The corporation made the Sec. 179 expensing election with regard to the new equipment and claimed bonus depreciation. Where applicable, use published IRS depreciation tables to compute 2008 depreciation (reproduced in Appendix C of this text). Other Information: ? The corporation?s activities do not qualify for the U.S. production activities deduction. ? Ignore the AMT and accumulated earnings tax. ? The corporation received dividends (see Income Statement in Table C:3-4) from taxable, domestic corporations, the stock of which Knoxville Musical Sales, Inc. owns less than 20%. ? The corporation paid $92,000 in cash dividends to its shareholders during the year and charged the payment directly to retained earnings. ? The state income tax in Table C:3-4 is the exact amount of such taxes incurred during the year. ? The corporation is not entitled any credits. Required: Prepare the 2008 corporate tax return for Knoxville Musical Sales, Inc. along with any necessary supporting schedules. Optional: Prepare Schedule M-3 (and Schedule B) as well as Schedule M-1 even though the IRS does not require both Schedule M-1 and Schedule M-3.
Question 3
Tax Research Assignments Background The five steps in tax research are: ? understand the facts ? identify issues ? locate relevant authorities ? analyze the tax authorities ? communicate research results. The two types of tax services that tax professionals use in tax research are annotated tax services, arranged by code section, and topical services, arranged by topic. Research questions often consist of questions of fact or questions of law. ? The answer to a question of fact hinges upon the facts and circumstances of the taxpayer's transaction. ? The answer to a question of law hinges upon the interpretation of the law, such as interpreting a particular phrase in a code section. When the researcher identifies that different authorities have conflicting views, she should evaluate the ?hierarchy,? jurisdiction, and age of the authorities. Once the tax researcher has identified relevant authorities, she must make sure that the authorities are still valid and up to date. The most common end product of a research question is a research memo, which has five basic parts: (1) facts, (2) issues, (3) authority list, (4) conclusion, and (5) analysis. Sample Research Memo Facts: Discuss facts relevant to the question presented?that is, facts that provide necessary background of the transaction (generally, who, what, when, where, and how much) and those facts that may influence the research answer. Keeping the fact discussion relatively brief will focus the reader's attention on the relevant characteristics of the transaction. Issues: State the specific issues that the memo addresses. This section confirms that you understand the research question, reminds the reader of the question being analyzed, and allows future researchers to determine whether the analysis in the memo is relevant. Issues should be written as specifically as possible and be limited to one or two sentences per issue. Authorities: In this section, the researcher cites the relevant tax authorities that apply to the issue, such as the IRC, court cases, and revenue rulings. How many authorities should you cite? Enough to provide a clear understanding of the issue and interpretation of the law. Remember, in order to reach an accurate assessment of the strength of your conclusion, you should consider authorities that may support your desired conclusion, as well as those that may go against it. Conclusion: There should be one conclusion per issue. Each conclusion should answer the question as briefly as possible, and preferably indicate why the answer is what it is. Analysis: The goal of the analysis is for the researcher to provide the reader a clear understanding of the area of law and specific authorities that apply. Typically, an analysis will be organized to discuss the general area(s) of law first (the code section) and then the specific authorities (court cases, revenue rulings) that apply to the research question. How many authorities should you discuss? As many as necessary to provide the reader an understanding of the issue and relevant authorities. After you discuss the relevant authorities, apply the authorities to your client's transaction and explain how the authorities result in your conclusion. ____________________________________________________________________________ Client Letters In addition to internal research memos, tax professionals often send their clients letters that summarize their research and recommendations. Basic components of the client letter include: (1) research question and limitations, (2) facts, (3) analysis, and (4) closing. Here is a sample letter: Assignments For this course you will have three tax research assignments. Each research assignment will include a memo and a client letter. Please submit your memo and client letter as an assignment upload in WebTycho. Tax Research Assignment 1 (due May 18, 2013) The facts for the first assignment are as follow: In 2009, Mr. Smith purchased a principal residence for $1,500,000. He made a down payment of $300,000 and financed the remainder by borrowing $1,200,000 through a loan secured by the residence. In 2009, Mr. Smith paid interest that accrued on the indebtedness during that year. He had no other debt secured by the residence. May he deduct the entire amount of interest which was paid on the home loan? Your research assignment will be graded using the following criteria: 1. Recognition of the important facts and issues 2. Correct conclusion 3. Proper citation of relevant sources 4. Format, Spelling & Grammar 5. Clarity of writing Tax Research Assignment 2 (due June 1, 2013) The facts for this assignment are as follow: R.E.M., a calendar year corporation and Athens, Georgia, band recently sold tickets ($20,000,000) for concerts scheduled in the United States for next year and the following year. For financial statement purposes, R.E.M. will recognize the income from the tickets when it performs the concerts. For tax purposes, it uses the accrual method and would prefer to defer the income from the ticket sales until it performs the concerts. This is the first time that it has sold tickets one or two years in advance. Michael Stipe has asked your advice. Your research assignment will be graded using the following criteria: 1. Recognition of the important facts and issues 2. Correct conclusion 3. Proper citation of relevant sources 4. Format, Spelling & Grammar 5. Clarity of writing Tax Research Assignment 3 (due June 15, 2013) The facts for this assignment are as follow: Mary and Bob have been married for 25 years. They are both college professors. Mary (50 years of age) makes $65,000 annually and Bob (60 years of age) makes $75,000 annually. Their oldest daughter is getting married. Bob and Mary would like to either 1) take out a second mortgage on their home (they can get an interest rate of 7 percent) or 2) withdraw funds from their IRAs or 3) sell their rental property. The cost of the wedding is $35,000. The equity in their home is $150,000; they have $80,000 in IRAs between the two of them and the basis of the rental property is $20,000. The rental property can be sold for $120,000. Mary and Bob want to know how they should finance the wedding and if tax implications will be a factor. Your research assignment will be graded using the following criteria: 1. Recognition of the important facts and issues 2. Correct conclusion 3. Proper citation of relevant sources 4. Format, Spelling & Grammar 5. Clarity of writing
Question 5
ENGL 227 Group Project Instructions In this project, teams will work together to write an informal analytical report about a different culture and a sales letter with a visual aid to members of that culture reflecting the report?s findings. Instructors will form teams during Week 2, and students will work together during Weeks 4 and 5 to complete both parts of the project. This project supports TCOs 5, 7, 8, and 9. Overview This project is based on Case Study 24 in Chapter 10, located on page 311 (Outsourcing: Letter from Kelly Services offering solutions). Important: Please take note of the additional instructions here, as the case has been modified to suit our class objectives. Here?s the situation: You work for Kelly Services, which, as the case states, has offices in 26 countries worldwide. The company is now in the process of opening additional offices in China, Japan, South Africa, Egypt, and Italy. Your team has been asked to work on developing sales letters to use in one of these new offices once it is open. The first step is to choose one of the countries listed above, research the culture, and write a brief report making communication recommendations based on your research. The second step is to write the sales letter. Important: Each week, you will also need to write a brief memo that indicates how the work was shared among your team members. There is a memo template for you to use in Doc Sharing. Part One: Analytical Report on a Targeted Sales Letter Your supervisor has asked that you file a brief informal report (approx. 2 single-spaced pages, 500-750 words, plus references) on the background of the company you have chosen to solicit with your sales letter. Do NOT write solely about what your target company background is but also focus on why you think this company makes a good target to sell Kelly services to (for your supervisor). Format the report as an informal report or memo report, and base the information on research. Include the memo about team member contributions; use the template in Doc Sharing. Use APA citations in case others who use this report later may need to do additional research. (Be sure to use both in-text parenthetical citations and an end-of text list of references). Organize your report according to the strategies suggested in Chapter 13: ? Focus on conclusions and recommendations ? Use logical arguments (the 2 + 2 = 4 approach or the yardstick approach) ? Do more than provide information?Be sure to analyze the information to help your readers apply it in future sales messages Use at least four sources, only two of which may be websites. At least two of your four sources must come from the DeVry Library. Ensure that all sources are credible. Do NOT use Wikipedia, travel agency websites, dictionaries, or encyclopedias as your sources, as these are not appropriate sources for college or business writing. Recommended web resources can be found in the Webliography area of the course. Part Two: Sales Letter with Visual Aid Next, using the information about the company you gathered during week four and the information about Kelly Services located in the case study, write a 1-2 page sales letter to your chosen company you have researched convincing them to use Kelly Services. ?Make a good first impression,? your supervisor says. ?Use a nice visual aid?a graph or a table. Make it look good.? Focus on the features and benefits that Kelly can offer to your targeted company. Format the letter as a business letter, and base the content on the information provided in the case study. Write the letter and design the visual aid reflecting the knowledge you?ve gained in your research of the company for which you are targeting. Organize your letter according to the strategies presented in Chapter 10. For our purposes, assume that Kelly Services does not have competition from other companies, but do the following: ? Assess customer needs (using the information in the case study, not additional research) ? Determine key selling points and benefits ? Anticipate purchasing objections ? Use the AIDA model ? Maintain legal and ethical standards, and demonstrate your awareness by writing a message tailored for your business For your visual aid, you will need more than an attractive picture. Create a table or a chart that helps convey your sales message. For example, you might include a table that succinctly displays the types of employees Kelly Services offers, a table that highlights employer and employee benefits, or a pie chart showing the percentage of Fortune 500 companies that use Kelly Services, or a graph showing another important statistic. Your visual aid should be attractively designed and should adhere to the guidelines set forth in Chapter 12: ? The visual aid must be ethical and must not distort information ? The visual aid must be clearly labeled ? The type of visual aid must be suitable for its intended purpose ? The visual aid must be integrated with the text in a way that will make sense to the audience ? The visual aid should demonstrate the same awareness sensitivity as the letter itself Again in week five, include the memo about team member contributions; use the template in Doc Sharing. Part one, the analytical report, is due at the end of Week 4. Part two, the sales letter, is due at the end of Week,thanks
