project tax planning
Skeeter10
ac2520_project_tax_planning.pdf
AC2520
Project
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P ROJECT: TAX P L ANNIN G
Project Introduction:
As a tax consultant, you will come across varied scenarios where you will be required to assist either an
individual or a corporate taxpayer with his/her tax-related concerns. You will be required to find out
answers to questions such as: Am I getting a refund or do I owe?; Should I file individual return or joint
return?; and Which type of incorporation should I choose for maximum tax benefit? This project has two
parts that present such scenarios to you (one in each project part), which you will be handling as a
professional tax consultant.
Course Learning Objectives Covered:
Differentiate between the tax rate systems.
Using scenarios that provide data for individuals and corporations, prepare a table that shows how
taxable income and tax rates are based on different variables.
Given resources outlining the tax practice environment, construct a scenario that demonstrates the
difference between tax compliance and tax research.
Perform a comparative analysis of two different businesses that are affected by tax-deferred
exchanges.
Discuss earnings for all of the studied entities introduced previously, and offer the methods of
distribution of income as it impacts the taxable income of a corporation.
AC2520
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P ROJECT SUBM ISS ION P L AN
Project
Part Description/Requirements of Project Part Evaluation Criteria
Project
Part 1
Assessment Preparation Checklist:
To prepare for Project Part 1:
Revisit the assigned readings for Modules 1 through 3
from your textbook.
In addition, revisit the lessons for Modules 1 through 3
that present important points that you need to
consider before submitting Project Part 1.
Title: Tax Planning for Individual Taxpayers
Tim and Monica Nelson are married, file a joint return, and are
your newest tax clients.
They provide you with the following information relating to
their 2013 tax return:
1. Tim works as a pediatrician for the county hospital. The
W-2 form he received from the hospital shows wages of
$150,000 and state income tax withheld of $8,500.
2. Monica spends much of her time volunteering, but also
works as a substitute teacher for local schools. During
the year, she spent 900 hours volunteering. When she
doesn’t volunteer, she earns $8.00 per hour working as
a substitute. The W-2 form she received from the
school district shows total wages of $3,888 and state
income tax withheld of $85.
3. On April 13, the couple paid $250 in state taxes with
their 2012 state income tax return. The Nelson’s state
and local sales taxes in 2013 were $5,500.
The project rubric will
be used to grade this
assessment. In
addition, the
following criteria will
be considered for
assessing your
performance:
1. Correct application
of all the rules,
formulas, and
provisions
2. A systematic
approach to federal
taxation
3. Correct
mathematical
calculations
AC2520
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Project
Part Description/Requirements of Project Part Evaluation Criteria
4. On December 18, the Nelsons donated a small building
to the Boy Scouts of America. They purchased the
building three years ago for $80,000. A professional
appraiser determined the fair market value of the
home was $96,000 on December 12.
5. Tim and Monica both received corrective eye surgery at
a total cost of $3,000. They also paid $1,900 in health
insurance premiums.
6. On June 1, the couple bought a car for $30,000, paying
$18,000 down and borrowing $12,000. They paid $750
total interest on the loan in 2013.
7. On June 10, the Nelsons took out a home equity loan of
$20,000 to expand their home. They paid a total of
$850 interest with their monthly payments on the loan.
8. The Nelsons paid a total of $2,300 interest on their
original home loan.
9. They sold stock in Cabinets, Inc. for $5,200, which they
purchased for $7,900 in March of the current year.
They also sold stock in The Outdoor Corporation for
$12,500, which they purchased several years ago for
$8,600.
10. Tim incurred the following expenses related to his
profession, none of which were reimbursed by his
employer: Subscriptions to medical journals of $400
and an annual membership fee to American Medical
Association (AMA) of $250
11. During the year, the couple paid their former tax
advisor $700 to prepare their prior year tax return.
AC2520
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Project
Part Description/Requirements of Project Part Evaluation Criteria
12. The Nelsons do not have children, and they do not
provide significant financial support to any family
members.
Task: Compute the Nelson’s taxable income for 2013.
Submission Requirements:
Submit your answer in a Microsoft Word document, showing
step-by-step solutions for all calculations. The submission
should use:
Font: Arial; 12-point
Line spacing: Double
Citation: APA format
Due: Module 4
Grading Weight: 12.5%
Project
Part 2
Assessment Preparation Checklist:
To prepare for Project Part 2:
Revisit the assigned readings for Modules 4 and 5
from your textbook.
In addition, revisit the lessons for Module 4 and 5 that
present important points that you need to consider
before submitting Project Part 2.
Title: Tax Planning for Corporate Taxpayers
Jackson Corporation prepared the following book income
statement for its year ended December 31, 2013:
Sales-----------------------------------
----
$950,000
(450,000)
The project rubric will
be used to grade this
assessment. In
addition, the
following criteria will
be considered for
assessing your
performance:
1. Proper application
of all the rules,
formulas, and
provisions
2. A systematic
AC2520
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Project
Part Description/Requirements of Project Part Evaluation Criteria
Minus: Cost of goods sold----------
-
Gross profit $500,000
Plus:
Dividends received on Invest
Corporation stock--------------------
--
Gain on sale of Invest Corporation
stock-----------------------------------
---
$3,000
$30,000
Total dividends and gain $33,000
Minus:
Depreciation ($7,500 + $52,000)--
-
Bad debt expense---------------------
-
Other operating expenses-----------
Loss on sale of Equipment 1-------
-
$59,500
$22,000
$105,500
$70,000
Total expenses and loss-------------
-
(257,000)
Net income per book before taxes-
-------------------------------------
$276,000
Minus:
Federal income tax expense--------
(90,000)
Net income per book---------------- $186,000
Information on equipment depreciation and sale:
Equipment 1:
approach to federal
taxation.
3. Correct
mathematical
calculations.
AC2520
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Project
Part Description/Requirements of Project Part Evaluation Criteria
Acquired March 3, 2011 for $180,000
For books: 12-year life; straight-line depreciation
Sold February 17, 2013 for $80,000
Sales price $80,000
Cost $180,000
Minus:
Depreciation for 2011 (1⁄2 year)
Depreciation for 2012
($180,000/12)
Depreciation for 2013 (1⁄2 year)
$7,500
$15,000
$7,500
Total book depreciation (30,000)
Book value at time of sale (150,000)
Book loss on sale of Equipment 1 $70,000
For tax: Seven-year Modified Accelerated Cost
Recovery System (MACRS) property for which the
corporation made no Sec. 179 election in the
acquisition year and elected out of bonus depreciation.
Equipment 2:
• Acquired February 16, 2012 for $624,000
• For books: 12-year life; straight-line depreciation
• Book depreciation in 2013: $624,000/12 = $52,000
• For tax: Seven-year MACRS property for which the
corporation made the Sec. 179 election in 2012 but
elected out of bonus depreciation.
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Part Description/Requirements of Project Part Evaluation Criteria
Other information:
Under the direct write-off method, Jackson deducts
$15,000 of bad debts for tax purposes.
Jackson has a $40,000 Net Operating Loss (NOL)
carryover and a $6,000 capital loss carryover from last
year.
Jackson purchased the Invest Corporation stock (less
than 20% owned) on June 21, 2011, for $25,000 and
sold the stock on December 23, 2013, for $55,000.
Jackson Corporation has a qualified production
activities income of $120,000.
Tasks:
1. For 2013, calculate Jackson’s tax depreciation
deduction for Equipment 1 and Equipment 2, and
determine the tax loss on the sale of Equipment 1.
2. For 2013, calculate Jackson’s taxable income and tax
liability.
3. Prepare a schedule reconciling net income per book to
taxable income before special deductions (Form 1120,
line 28).
Submission Requirements:
Submit your answer in a Microsoft Word document, showing
step-by-step solutions for all calculations. The submission
should use:
Font: Arial; 12-point
Line spacing: Double
Citation: APA format
AC2520
Project
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Project
Part Description/Requirements of Project Part Evaluation Criteria
Due: Module 5
Grading Weight: 12.5%
