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
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.
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.
D. Explain the tax effect based on providing $180,000 per year for the client’s salary and $70,000 per year for his daughter’s salary if they withdraw
cash from the business or pay dividends as appropriate.
E. Justify the percentage of ownership the client’s daughter should have in the business based on the type of business entity recommended.
Consider the tax law in reference to the recommendation and how the decision will affect the daughter’s tax return.
F. Create a detailed tax planning proposal explaining how the client’s family can experience tax savings should the client pass away. Cite relevant
governing rules and regulations.
G. Illustrate a strategic plan that addresses the need for a will in handling the estate. Detail what happens to the business, land, and investments
consistent with tax codes and regulations. Consider extending the plan to address the client’s estate tax, trust, and charitable contributions
while minimizing estate tax.
H. Recommend estate planning strategies consistent with tax codes and regulations for the purpose of reducing the taxable estate. Be sure to
include gifting property to heirs in your response.
I. Illustrate the best course of action if the client decides to leave the business in three years. Provide some advice to him should he decide to gift
the business to his daughter or transfer the assets or common stock to her, depending on the business entity you have selected.
J. Illustrate the best course of action if the client wishes to sell the business. Consider the tax consequences with regard to capital gains and losses,
ordinary income issues, and selling an existing operating business.
II. Conclusion
A. Compare and contrast the advantages and disadvantages of the sole proprietorship, the partnership, the S corporation, and the C corporation
as a tax vehicle that could meet the client’s need for accounting information about the business. Consider providing justification for why the
client would not necessarily choose the other business entities.
B. Summarize the alternative involving the possibility of liquidating the business using rationale based on tax research, codes, and regulations.
C. Summarize the alternative of transferring the business activity, providing justification based on tax research, codes, and regulations.
III. Appendix: To further justify your professional advice regarding whether the client should continue to operate as a sole proprietor or convert the business
to a partnership, an S corporation, or a C corporation, complete the appropriate tax schedules using the most current tax forms for the requirements
below.
A. Prepare Bob’s Form 1040 with the appropriate tax schedules and Mandy’s Form 1040 (based on the salary he wanted to pay her, $70,000 per
year). Assume that you are filing the tax returns using sole proprietorship for the business entity and treating Mandy as an employee, regardless
of your initial recommendation for this client.
B. Prepare the appropriate forms in the event that the client decides to convert the business to a partnership, an S corporation, or a C corporation
based on your recommendation. Also, include the tax effect, if any, of the money that the client and his daughter are taking from the business
for their personal expenses. Include the owners’ personal 1040 forms as well.
C. Justify your recommendation using schedules and tax forms you completed by explaining how the forms and schedules result in the best
economic solution for the client consistent with IRS code and regulations.
Milestones
Milestone One: Business Entity, Accounting Method, and Tax Laws
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.
Milestone Two: Tax Effects and Ownership Interest
In Module Four, you will submit a draft explaining the tax effects of salaries if cash is withdrawn from a business. You must also explain the tax consequences of
paying the owners based on the selected business entity, as well as the tax consequences for each individual’s personal tax returns. This assignment will address
Section I, Parts D and E of the critical elements. This milestone is graded with the Milestone Two Rubric.
Milestone Three: Strategic Planning, Gift Taxes, and Disposing of a Business
In Module Five, you will submit a draft of your tax planning proposal and strategic plan recommendation regarding the client’s estate. You must also address the
tax effects of selling the business prior to the death of the founder. This assignment will address Section I, Parts F through J of the critical elements. This
milestone is graded with the Milestone Three Rubric.
Milestone Four: Conclusion
In Module Seven, you will submit a draft of your conclusion. You will compare and contrast the advantages of each type of business entity that the client may
select, summarize the alternative involving the possibility of liquidating the business using rationale, and, finally, summarize the alternative of transferring the
business activity providing justification based on tax research, code, and regulations. This assignment will address Section II of the critical elements. This
milestone is graded with the Milestone Four Rubric.
Final Submission: Memorandum With Appendix
In Module Nine, you will complete all necessary tax forms according to Section III of the critical elements. You will then submit a comprehensive memorandum
to the client that covers all critical elements and includes an appendix of IRS tax forms and schedules necessary to support your advice. You may also submit tax
forms and schedules to illustrate the tax effects of continuing to operate the business as a sole proprietorship. The final submission should be a complete
document containing all of the critical elements of the final project. Feedback gained during the course should be reflected in your final submission. This
submission will be graded using the Final Project Rubric.
Note: The textbook includes tax return forms for the prior year in the appendix because of publishing deadlines. Use the tax forms available in the textbook
to arrive at your answers.
Deliverables
Milestone
Deliverable
Module Due
Grading
One
Business Entity, Accounting Method, and Tax
Laws
Tax Effects and Ownership Interest
Two
Graded separately; Milestone One Rubric
Four
Graded separately; Milestone Two Rubric
Five
Graded separately; Milestone Three Rubric
Seven
Graded separately; Milestone Four Rubric
Nine
Graded separately; Final Project Rubric
Two
Three
Four
Strategic Planning, Gift Taxes, and Disposing
of a Business
Conclusion
Final Submission: Memorandum With
Appendix
Final Project Rubric
Guidelines for Submission: Submit your memorandum with standard formatting: 7–10 pages, double-spaced, in APA format, with one-inch margins, 12-point
Times New Roman font, and an appendix containing electronic versions of the appropriate IRS tax schedules and forms.
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
Memo: Business
Entity
Exemplary
Meets “Proficient” criteria and
references appropriate tax
code and regulations in
justification
(100%)
Proficient
Explains why the
recommended entity is the
most appropriate choice using
logical reasoning
(90%)
Memo: Accounting
Method
Meets “Proficient” criteria and
details cover the advantages
and disadvantages
(100%)
Defends the decision to choose
the recommended entity by
describing the accounting
method
(90%)
Needs Improvement
Explains why the
recommended entity is the
most appropriate choice but
details either lack relevance or
are cursory
(70%)
Defends the decision to choose
the recommended entity but
details are inaccurate or
cursory
(70%)
Not Evident
Does not explain why the
recommended entity is the
most appropriate choice
(0%)
Does not defend the decision
to choose the recommended
entity
(0%)
Value
6
6
Memo: Tax Law
Memo: Tax Effect on
Cash Withdrawals or
Dividends
Memo: Percentage
of Ownership
Memo: Tax Planning
Proposal
Meets “Proficient” criteria and
details illustrate versatility of
thought when using tax law,
code, and regulations
(100%)
Meets “Proficient” criteria and
provides, in detail, more than
one option
(100%)
Meets “Proficient” criteria and
details explain how the
decision will affect the client’s
daughter’s tax return
(100%)
Meets “Proficient” criteria and
details include relevant
governing rules and regulations
(100%)
Memo: Strategic
Plan
Meets “Proficient” criteria and
extends the plan to address the
estate tax, trust, and charitable
contributions while minimizing
inheritance tax
(100%)
Memo: Estate
Planning Strategies
Meets “Proficient” criteria and
details exemplify gift-giving
strategies that reduce the
taxable estate
(100%)
Memo: Gift or
Transfer the Assets
Meets “Proficient” criteria and
provides justification of both
the gifting and transferring of
assets
(100%)
Interprets tax law pertaining to
the selected business entity
using tax law, code, and
regulations as justification
(90%)
Explains the tax effect based on
providing the client and his
daughter salaries if they
withdraw cash from the
company or pay dividends
(90%)
Justifies the percentage of
ownership the client’s daughter
should have based on the
business recommended
(90%)
Creates a tax planning proposal
explaining how the family can
experience tax savings should
the client pass away
(90%)
Illustrates a strategic plan that
addresses the need for a will in
handling the estate, which
includes the business, land, and
investments, consistent with
governing code and regulations
(90%)
Recommends estate planning
strategies consistent with
governing code and
regulations, including gifting
property to heirs
(90%)
Illustrates the best course of
action the client should take
including advice on gifting or
transferring assets if he leaves
the business in three years
(90%)
Interprets and justifies tax law
pertaining to the selected
business entity but details are
either inaccurate or irrelevant
(70%)
Explains the tax effect based on
providing the client and his
daughter salaries but details
are inaccurate or cursory
(70%)
Does not interpret and justify
tax law pertaining to the
selected business entity
(0%)
6
Does not explain the tax effect
based on providing the client
and his daughter salaries
(0%)
6
Justifies the percentage of
ownership the client’s daughter
should have but details are
irrelevant or cursory
(70%)
Creates a tax planning proposal
but details are inaccurate or
irrelevant
(70%)
Does not justify the percentage
of ownership the client’s
daughter should have
(0%)
6
Does not create a tax planning
proposal
(0%)
6
Illustrates a strategic plan that
addresses the need for a will,
but details lack coverage of
business, land, or investments
or are not consistent with
governing code and regulations
(70%)
Recommends estate planning
strategies but details are
inaccurate or cursory
(70%)
Does not illustrate a strategic
plan that addresses the need
for a will
(0%)
6
Does not recommend estate
planning strategies
(0%)
6
Illustrates a course of action
the client should take if he
leaves the business in three
years but details are either
inaccurate or irrelevant
(70%)
Does not illustrate the best
course of action the client
should take if he leaves the
business in three years
(0%)
6
Memo: Sell the
Business
Conclusion:
Advantages and
Disadvantages
Conclusion:
Liquidating the
Business
Conclusion:
Transferring the
Business Activity
Meets “Proficient” criteria and
addresses ordinary income
issues, and capital gains and
losses consistent with tax code
and regulations
(100%)
Meets “Proficient” criteria and
shows keen insight into the
advantages and disadvantages
of choosing the other business
entities
(100%)
Meets “Proficient” criteria and
is written in an appropriate
voice for the target audience
(100%)
Meets “Proficient” criteria and
is written in an appropriate
voice for the target audience
(100%)
Appendix: Form
1040 and Tax
Schedules
Appendix: Forms to
Convert the Business
Appendix:
Justification of
Schedules and Tax
Forms
Meets “Proficient” criteria and
references relevant IRS code
and regulations
(100%)
Illustrates the best course of
action if the client wishes to
sell the business and includes
tax consequences when selling
an existing operating business
(90%)
Compares and contrasts
advantages and disadvantages
of all the business entities as
tax vehicles to meet the client’s
needs
(90%)
Summarizes the alternative
choice involving liquidating the
business, using tax research,
governing rules, and
regulations
(90%)
Summarizes the alternative
choice involving transferring
the business activity using tax
research, governing rules, and
regulations
(90%)
Prepares the appropriate pages
of Form 1040 and the tax
schedules accurately and
completely based on the sole
proprietorship business entity
(100%)
Prepares the appropriate
remaining forms for a
partnership, S corporation, or C
corporation accurately and
completely
(100%)
Justifies the selected schedules
and tax forms by explaining
how the schedules and forms
result in the best economic
solution for the client
(90%)
Illustrates a course of action if
the client wishes to sell the
business, but details are
inaccurate or cursory
(70%)
Does not illustrate a course of
action if the client wishes to
sell the business
(0%)
6
Compares and contrasts
advantages and disadvantages
of all the business entities but
details are either incomplete or
inaccurate
(70%)
Summarizes the alternative
choice involving liquidating the
business but details are either
unclear for target audience or
cursory
(70%)
Summarizes the alternative
choice involving transferring
the business activity but details
are either unclear or cursory
(70%)
Does not compare and contrast
advantages and disadvantages
of all the business entities
(0%)
6
Does not summarize the
alternative choice involving
liquidating the business
(0%)
6
Does not summarize the
alternative choice involving
transferring the business
activity
(0%)
6
Prepares the appropriate pages
of Form 1040 and tax schedules
based on the sole
proprietorship business entity
but details are either
incomplete or inaccurate
(70%)
Prepares the appropriate
remaining forms for a
partnership, S corporation, or C
corporation but details are
incomplete or inaccurate
(70%)
Justifies the selection of the
schedules and tax forms but
details are either inaccurate or
cursory
(70%)
Does not complete the
appropriate pages of Form
1040 based on the sole
proprietorship business entity
(0%)
6
Does not prepare the
appropriate remaining forms
(0%)
6
Does not justify the selection of
the schedules and tax forms
(0%)
6
Articulation of
Response
Submission is free of errors
related to citations, grammar,
spelling, syntax, and
organization and is presented
in a professional and easy-toread format
(100%)
Submission has no major errors
related to citations, grammar,
spelling, syntax, or organization
(90%)
Submission has major errors
related to citations, grammar,
spelling, syntax, or organization
that negatively impact
readability and articulation of
main ideas
(70%)
Submission has critical errors
related to citations, grammar,
spelling, syntax, or organization
that prevent understanding of
ideas
(0%)
Total
4
100%
