You are currently working at a mid-sized certified public accounting firm. Your client is Bob Jones.Bob has hired your firm for professional advice regarding whether he should operate as a sole proprietor,a partnership, an S corporation, or a C corporation.
Using the supplied Data Sheetfor Final Projectdocument, prepare a memorandum to the clientrecommending a type of business entity, including an appendix of supporting IRS tax schedules and forms.Specifically,the following critical elementsmust be addressed:I.RecommendationA.Recommend a type of business entityfor the client to consider based on your tax research. Consider justifying your recommendation using the code and regulations that relate to the business entity. B.Differentiate between accrual accounting and cash basis. Based on the type of business and the client’s accounting system, what is the impact when revenue is recognized?C.Based on the decision of accrual vs. cash basis, describe when revenuewould be recognizedon the saleof inventory, and how the accrual reporting differs from cash basis.D.Determine the economic impacton the client’s financial situation. Based on your decision, determine the potential tax liability, keeping in mind appropriate Internal Revenue Code andTreasuryregulations.E.Identify the tax consequenceson the sale or exchange of the land consistent with capital gain rules. Consider the selling expense, broker’s fees, closing costs, appraisals, and surveys and the correct schedule form to complete.F.Justify whether or not the client should choose a business entity that haslimited liability protection. Be sure to include possible future liability issues based on the potential economic impact and appropriate Internal RevenueCode andTreasuryregulations.G.Describe the tax effecton the recommended businessentity and the impact it will have on the client’s personal tax return. Consider addressing how the business entity affects the completion of the 1040 tax form.II.ConclusionA.Evaluate the economic impacton the client’s personal returnsbased on the recommended entity. Justify why the client would not choose the other business entities by informingthe client of the differences.B.Justify your recommendation regarding the client’s daughter having an ownership interest. Provide details supporting the recommendation taking into consideration the jargon and mechanics of the transaction.
C.Summarize cash or accrual basis accounting systems inrelation to the selected business entity. Consider how the accounting system impacts revenuerecognition consistent with Internal RevenueCode andTreasuryregulations.
D.Describe the after tax effects on the client’s cash flowbased on the sale of the land that isneeded to provide the funds necessary to start the business. Consider including capital gains tax rules.
E.Explain whether or not the client and his child should take a salary or cash distribution according to tax purposes and Internal RevenueCode andTreasuryregulations. Consider the type of business and the tax effect whether it is salary, dividends,or cash withdrawal.
III.AppendixBased on your recommendation to the client regarding proprietorship, taxable income, and sale of land, complete the appropriate tax schedules and forms described below.
A.Prepare the appropriate schedule(s)and tax form(s)for the recommended business entity.
B.Prepare the appropriate pagesof Form 1040including all relevanttax schedulesand forms to reflect taxable income based on your calculations and the disposition of assets.
C.Illustrate how creative problem solving and versatility of thought impact professional advice that you intended to result in the best economic solutions for the client. Consider providing real-world examples to support your claim
