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ACT611_TaxResearch3_SP22.docxACT 611 Federal Taxation
Tax Research Assignment #3
Using the information from Chapter 7 and the tax research resources from Chapter 5 write a tax research memo for the firm’s records (TAX FILE MEMORANDUM). No client memo is necessary. Refer to pages 5-15 through 5-16 for a sample memo format. Use Checkpoint to find your primary sources and only cite primary sources. Some Internal Revenue Code (IRC) sections to consider include, but not limited to, the following: 162(a); 263(a); 1016(a)(2); 1012; 168; 168(k); 230F(a); 179(d)(1); 179(b)(2); 179(b)(3), etc.
When writing this research memo, you may have a number of research issues. Use the numbered items to develop your tax issues. List them separately (bullet points or numbered). Some of the bullet items are not research issues but information that should be incorporate and answered in your analysis. The law and analysis section should address each research issues in a separate paragraphs. Please do not embed your research into this document!
Chocolat, is a newly formed chocolate manufacturing company in Massachusetts. During the current year, the company acquired and placed several assets in service. The new facility design includes areas for candy making classes. A list of the year’s acquisition is outlined below.
Other: The company has taxable income for the year of $500,000.
|
Current Year Expenditures |
Date Placed in Service |
Amount |
|
Building (building $950k; land $2500k) |
April 1 |
$1,200,000 |
|
Manufacturing equipment for melting, mixing, and tempering chocolate |
June 5 |
1,900,000 |
|
Build-out of interior area for show room and candy making lessons |
October 10 |
250,000 |
|
Displays, molds, and fixtures for candy-making lessons |
November 2 |
455,000 |
|
Office furniture |
December 1 |
60,000 |
|
Delivery van (6,000 lbs.) |
December 15 |
45,000 |
|
Total Cost |
|
3,910,000 |
Required:
Research the following to assist the company in maximizing tax savings for the year using the various allowed cost recovery methods. You will be required to (1) submit a research memo document and (2) an Excel template (provided) to calculate depreciation and support your analysis. Your analysis and your computations must be consistent between the written document and the Excel spreadsheet calculations.
When drafting your memo your analysis should address the following:
1. Provide a concise but comprehensive overview of the concept of cost recovery. (5 points)
2. Determine from a tax perspective, if the costs above are deductible expenses or capitalized costs. Define what constitutes an acquisition to be capitalization. Explain. (5 points)
3. Compute the corporation’s MACRS deprecation with respect to the assets placed in service this year. Assume that the Company does not elect to use Section 179 or bonus depreciation. Use the provided Excel template and detail each acquisition with the required information. Refer to Revenue Procedure 87-56 for information on asset class information. (15 points)
4. The corporation decided to purchase $300,000 of additional specialty candy-making equipment in December. The corporation could buy the equipment in December or postpone until January of the new year. What effect would this decision have on the depreciation calculation with regard to the assets already placed in service. Be specific. (10 points)
5. What is Sec 179 Expensing election? How much and what assets are eligible? Are any of the asset not eligible? If so, explain. Does the company face either, or both of the two limitations? Be specific in your explanation. (15 points)
6. What is bonus depreciation? How much and what assets are eligible? Are any of the asset not eligible? If so, explain. Does the company face any limitations? Be specific in your explanation. (10 points)
7. Assume that the corporation will maximize its cost recovery deductions. Using the Excel template, calculate the amount of MACRS depreciation, Section 179 and bonus depreciation. (15 points)
8. Explain the order of application and the overall strategy an organization would use to determine the method and amounts used for each. (5 points)
9. Use appropriate format, technical language, the written analysis should reflect your own word with appropriate references. However, only cite primary sources (law) in the body of the memo. Your written analysis should be consistent with the Excel calculated amounts. (15 points)
10. Write a reflection paragraph discussing what you learned from completing the assignment. Be specific. Also, what could be done to improve the assignment. Your reflection should be incorporated at the end of your written document after your conclusion. (5 points)
File Name: TaxResearch#3_SP22.docx
ACT 611 Federal Taxation
Tax Research Assignment
#3
Usin
g the information from
Chapter 7
and
the
tax research resources
from Chapter 5
write a tax
research memo
for the firm’s records (TAX FILE MEMORANDUM)
.
No client memo is
necessary.
Refer to pages 5
-
15 through 5
-
1
6
for a sample memo
format
.
Use Checkpoint to find
your primary sources
and
only cite primary sources.
Some
Internal Revenue Code (IRC) sections
to consider
include, but not limited to,
the
following: 162(a); 263(a); 1016(a)(2); 1012; 168;
168(k); 230F(a); 179(d)(1); 179(b)(2); 179(b)(3)
, etc.
When writing
this
research
memo,
you
may
have a number of research issues.
Use the numbered
items to develop your tax issues.
List them
separately (bul
let
points
or numbered)
.
Some of the
bullet items are not research issues but information that should be incorporate and answered in
your analysis.
The law and analysis section
should
address
each research
issues in
a
separate
paragraphs. Please do not emb
ed your research into this document
!
Chocolat
, is a newly formed chocolate manufacturing company
in
Massachusetts
.
During the
current year,
the company acquired and placed several assets in service.
The new
facility
design
include
s
areas for candy making
classes
.
A list of the year’s acquisition is
outlined
below.
Other:
The c
ompany has
taxable income for the year of $
500
,000
.
Current Year Expenditures
Date Placed
in Service
Amount
Building (building $950k; land $2500k)
April 1
$1,200,000
Manufacturing equipment for melting, mixing, and
tempering chocolate
June
5
1,
900,000
Build
-
out of interior area for show room and candy
making lessons
October 10
2
50,000
Displays, molds, and fixtures for candy
-
making lessons
November 2
455,000
Office furniture
December 1
60,000
Delivery van (6,000 lbs.)
December 15
45,000
Total Cost
3
,
9
10,000
Required:
Research the following
to assist the company in maximizing
tax savings for the year using
the
various
allowed cost recovery method
s
.
You will be required to
(1)
submit a research
memo document
and (2) an
Excel template
(provided)
to calculate depreciation and support
your analysis. Your analysis and your computations must be consistent between the written
document and the Excel spreadsh
eet calculations.
ACT 611 Federal Taxation
Tax Research Assignment #3
Using the information from Chapter 7 and the tax research resources from Chapter 5 write a tax
research memo for the firm’s records (TAX FILE MEMORANDUM). No client memo is
necessary. Refer to pages 5-15 through 5-16 for a sample memo format. Use Checkpoint to find
your primary sources and only cite primary sources. Some Internal Revenue Code (IRC) sections
to consider include, but not limited to, the following: 162(a); 263(a); 1016(a)(2); 1012; 168;
168(k); 230F(a); 179(d)(1); 179(b)(2); 179(b)(3), etc.
When writing this research memo, you may have a number of research issues. Use the numbered
items to develop your tax issues. List them separately (bullet points or numbered). Some of the
bullet items are not research issues but information that should be incorporate and answered in
your analysis. The law and analysis section should address each research issues in a separate
paragraphs. Please do not embed your research into this document!
Chocolat, is a newly formed chocolate manufacturing company in Massachusetts. During the
current year, the company acquired and placed several assets in service. The new facility
design includes areas for candy making classes. A list of the year’s acquisition is outlined
below.
Other: The company has taxable income for the year of $500,000.
Current Year Expenditures Date Placed
in Service
Amount
Building (building $950k; land $2500k) April 1 $1,200,000
Manufacturing equipment for melting, mixing, and
tempering chocolate
June 5 1,900,000
Build-out of interior area for show room and candy
making lessons
October 10 250,000
Displays, molds, and fixtures for candy-making lessons November 2 455,000
Office furniture December 1 60,000
Delivery van (6,000 lbs.) December 15 45,000
Total Cost 3,910,000
Required:
Research the following to assist the company in maximizing tax savings for the year using
the various allowed cost recovery methods. You will be required to (1) submit a research
memo document and (2) an Excel template (provided) to calculate depreciation and support
your analysis. Your analysis and your computations must be consistent between the written
document and the Excel spreadsheet calculations.
