PLEASE READ THE INSTRUCTION AND DETAILS BEFORE STARTING TO DO THE ASSIGNMENTS I & II.
I- ACC 317- WK 9This week's assignment presents a scenario and requires a comprehensive summary which is connected to the understanding of business tax forms. Using what you have learned from the Media Activity –
Business Tax Forms: A Comprehensive Guide
be aware that the completion of the
Tax Forms 1120-S and Schedule K
are not required in this assignment but refer to your knowledge of them to fulfill this assignment. Please refer to the Media Activity –
Mastering Business Tax Forms: A Comprehensive Guide to Essential Forms for Business Tax Returns
Links to an external site.
to assist you in completing Assignment 3.
Scenario
Beechwood Bake Shop - Backstory
Bob has been running a small bakery as a sole proprietorship for several years. His business has grown steadily each year. He is well known for his cookies and cupcakes. In addition, he has Betty, whom he has known for years, provide custom cakes.
Bob owns the small shop that Beechwood operates out of. In addition, he has opened up a satellite location on the other side of town. The original location has a kitchen where everything is made, and the satellite location receives a daily delivery of finished product to sell. There is a van, owned by Bob, which is used for the daily delivery, as well as delivery of the custom cakes to various locations when needed.
Additional Location
The satellite location is a small storefront that is owned by Betty. Betty’s family has owned the property for years. It is completely paid off and she does not charge any rent for the location. She knows that Bob has always talked about growing the company from a sole proprietorship to a corporation, and they have an unwritten agreement that if/when that happens, Betty will become a part owner in exchange for providing the store front.
Family Component
Bob's daughter, Jessie, has recently moved back to town and has been working at Beechwood. In addition to putting in hours just working the counter at the satellite location, she has begun reaching out to local businesses, primarily restaurants and grocery stores, about selling the cookies, cupcakes, and cakes. She has been quite successful in bringing in some new business, and Bob has started looking to hire another baker to help out with the additional volume.Bob is delighted with Jessie's dedication and success, since he was hoping to one day leave the business to her.
In addition to Bob, Betty, and Jessie, each location has the equivalent of 1.5 employees working.
Instructions
Bob's attorney, Haley Boling, has been after him for years to incorporate. She has explained (many times) that moving from a sole proprietorship to a S-Corporation will not only help to limit Bob's potential liabilities, but it can also make it easier to build a business succession plan.
Bob has decided that now is the time to make the change and has agreed to meet with Haley to "get the ball rolling." At their meeting, they hammer out the following things:
Additional Information
- The company will become an S-corporation.
- Only including common stock.
- The ownership interest for the common stock of the new company will be:
- 60% to Bob, 20% to Betty, and 20% to Jessie
- Haley will handle the legal establishment of the new entity including:
- Retitling/transferring assets from the proprietorship to the corporation.
- Filing any necessary state/federal forms.
- Creating and issuing shares to the stockholders.
Your role
Everything is moving right along in the discussions when a big snag comes up. Haley informs Bob that she does not feel comfortable providing tax advice or answering tax questions for the changes that will occur. Haley recommends you, in her place, since she has worked with you on numerous other occasions and those experiences have all turned out well. Bob agrees, and they reach out to you. You tell, Haley and Bob to send you their questions and you will respond accordingly.
The Assignment
Please complete the assignment following the instructions:
Write 1–3-page academic summary using the scenario above regarding Bob's decision to move his business from a Sole Proprietorship to an S-Corporation:
Support your summary by supplying the following information:
- Identify two Pros and two Cons of Business Ownership in an S-Corporation:
- From a tax perspective, what are the pros and cons of putting the buildings in the company's name or keeping them in Bob's and Betty's name and charging rent?
- Will / should the stockholders (Bob, Betty, and Jessie) receive a paycheck?
- How will this impact the taxes that they pay?
- How will it impact the taxes that Beechwood Bakery pays?
- Identify four impacts of the owners receiving a paycheck on the taxes paid for an S-Corporation. Historically, since the company operated as a sole proprietorship, Bob was responsible for paying income taxes on the profits.
- How will that work move this forward as an S-Corporation?
- Who will be responsible for paying the income taxes?
- Will Beechwood Bakery itself pay any income taxes?
- Identify four ways income taxes are handled within an S-Corporation?
- Identify the four income tax forms required for a S-Corporation in this scenario.
- Identify a 351 transfer within a S-Corporation and how it applies to this scenario.
Your assignment must follow these formatting requirements:
- Use at least three current, quality academic or authoritative sources in this assignment.
- Choose sources that are credible, relevant, and appropriate.
- Cite each source listed on your source page at least one time within your assignment.
II-ACC 499-
WK10- Due date XXXXXXXXXX
Federal prosecutors have charged Texas billionaire, Robert Brockman, with a $2 billion tax fraud scheme in what they say is the largest such case against an American. Before attempting this assignment, review the case,
CEO of Multibillion-Dollar Software Company Indicted for Largest-Ever Tax Evasion as Private Equity CEO Makes NPA to Cooperate in the Case
.
Instructions
Write a 2–3 page paper about this tax fraud case, in which you:
- Summarize the Robert Brockman tax fraud case.
- Evaluate the issues that led to the tax fraud.
- Analyze a CPA's culpability in cases of tax fraud by clients, regardless of whether they had knowledge of the fraud.
- Evaluate ways a tax preparer can detect signs of tax fraud in order to prevent future tax fraud.
- Use three sources to support your writing. Choose sources that are credible, relevant, and appropriate. Cite each source listed on your source page at least one time within your assignment.