I need help doing a tax research project

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yfgrcuraf19

Business Finance

DeVry University

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This was a team project but I am doing everything on my own at the last minute since my team is not on point. 

Your team should use the scenario below of tax related information to respond, in memorandum form, to Thomas Drake's inquiry regarding the Section 199A deduction and its applicability to his business.

One submission of the tax research memorandum per team is expected.

Thomas Drake’s 2018 Tax Scenario

Thomas Drake is a small business owner, operating a manufacturing plant in Chicago, Illinois (as an S-Corp.)   He has heard about a new tax break called Section 199A (deduction for qualified business income) wherein he may be entitled to a deduction of up to 20% of his qualified business income.  If he can qualify for this deduction, it would result in significant tax savings for his business.  Consequently, he contacts your accounting firm to find out exactly what this deduction entails, and how, or if, he can qualify. 

Thomas provides the CPA firm with the following information regarding his 2018 estimated income from his business, Rebecca, his spouse’s income, and asset and payroll information related to his company.  (Thomas and Rebecca file “married filing jointly.”)

ItemAmountNet Income from Operations (S Corp) $175,000Spouse's (Rebecca) Income (from unrelated business)  $50,000Corporate Payroll $150,000Corporate Total Assets $1,500,000Taxable Income from Form 1040$160,000(Total Tax for Drake's after allowable deductions unrelated to the business) 

Your team will prepare a tax research memorandum detailing the statutory framework of this deduction, a thorough explanation of Section 199A and all the key definitions, a determination of whether Thomas qualifies for the deduction, a determination of the amount of this deduction, and what Thomas could do to maximize this deduction in the future.  The memorandum must be supported by tax research using IRC code, tax cases if any, and other scholarly journals and references.   Since some of this data is estimated, he is asking for a general analysis of his tax situation relative to this deduction.

Some specific issues which must be addressed are the following:

What is qualified business income (QBI)? What is included and what is not?

What is a qualified trade or business (SSTB)?

Any limitations, income or otherwise on this deduction?

What are some planning strategies for help Thomas maximize this deduction in future years?

What is an estimate of the amount of the deduction for 2018, if any?

The memorandum should be 7 – 10 pages with references to the IRC code and other tax support.  This memorandum will serve as the basis for the team PowerPoint presentation due in Week 8. 

Performing tax research to find correct answers to a given tax situation, and composing memorandums summarizing these findings, are important parts of tax practice. As outlined in your text, there are several authoritative primary tax law sources. The first, the Internal Revenue Code, is the law enacted by Congress. The Treasury Department and the Internal Revenue Service publish a number of materials that interpret and provide decisions, pronouncing their interpretation and application of the Code, including treasury regulations, revenue rulings, and revenue procedures. Finally, courts are often asked to hear tax disputes between taxpayers and the United States, and these courts issue rulings that interpret and apply the tax law, creating additional tax authority in the process. These combined writings constitute primary tax law authority, and these are the authorities that tax practitioners rely upon when a client asks for their opinions regarding how a proposed or a completed transaction should be treated for tax purposes.

Some of the more significant guidelines for this tax memorandum include the following:

Your submission must be completed in Microsoft Word.

You must use a reasonably easy-to-read font, such as Times New Roman or Arial, in at least a 12-point font size. Each page must have at least a 1-inch margin on all sides and be double spaced.

Appropriate citations are required.

The tax memorandum must be in traditional tax memorandum format, as outlined in your text. .

All DeVry University policies are in effect, including the Plagiarism Policy.

The team paper is due at the end of Week 7 of the course.

This assignment is worth 200 points. You will be graded on the overall quality of your submission, including the quality and thoroughness of your analysis and the professionalism of your submission. (See the grading rubric)

Tax research memorandums use a fairly standard format and structure. The four parts include the following.

Facts: In this section, you summarize the facts about the transaction or events that are relevant and material to the tax questions being asked. Frame them as precisely and succinctly as possible, and write them so that they can be understood by someone who has no knowledge of the underlying facts.

Issues: This is a succinct question that you are trying to answer or resolve in the memorandum.

Analysis: This section contains all of the substantive analysis that you needed to perform in order to come to reach a conclusion on the issue presented.  It discusses, in logical order, the various tax authorities to establish the tax rule or rules that apply to the fact pattern given. This includes such efforts as an analysis of the facts of these other cases and the language of the applicable Code section(s) at issue. Once the rules are established, it then applies those rules to the facts in the case.

Conclusions:   This section provides the answer to the taxpayer’s inquiry along with any tax planning suggestions for future implementation.   


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Running: TAX RESEARCH PROJECT

Tax Research Project: Thomas Drake’s 2018 Tax Scenario
Name
Institution Affiliation

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Date
To:
Through:
From:
Introduction to
Qualification for Business Income Deduction in Chicago, Illinois
Introduction
The Illinois CPA Society provides a highlight of potential tax deductions from business
incomes. These deductions are mainly directed to individuals who run own small business
ventures as their main or part of livelihoods. The qualification for business income tax
deductions is based on the kind of business or industry in which the owner operates. This
memorandum only provides useful information that hinds your qualification for the deduction in
Illinois with regard to the current statutory framework that details the ultimate qualification for
the respective tax deductions. It is crucial to note that other factors may affect the qualification
for the tax deductions as highlighted and discussed within this memo.
The objective of this memo is to point out the exact factors determining the client’s
qualification for a business income tax deduction in Chicago, Illinois (Colombo, 2009).
Adequate research and analysis have been conducted to analyze the statutory requirements, laws,
and conditions for qualifying to earn the tax deductions as deemed. As such, accounting,

TAX RESEARCH PROJECT

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statistical, and legal evaluations have been used as the key determinants of the results and
recommendations made in this memorandum.
Facts
Like most states, the State of Illinois derive funds from business tax deductions. Every
business is legally mandated to pay income tax or other forms of tax to the state government. The
amount of tax deducted usually depends on the legal form of the business. Corporations are often
subjected to paying a specific fraction of their income as corporate income tax. On the other
hand, pass-through entities like S corporations, partnerships, limited liability companies, as well
as sole proprietorships is subjected to a particular tax on a personal income level (Illinois CPA
Society, 2019).
The tax rate for personal income and corporate income differ significantly among states.
Although corporate tax rates are often viewed as flat across states irrespective of the amount of
business income, the rate usually range between 4% and 10% (Steingold, 2018). On the other
hand, tax rate on personal income often differ significantly based on the amount of personal
income. The tax rate range is much wider compared to corporate rate because it can range
between 0% and 9%. In some states, this rate could be more.
Over the recent past, six states have been run without reliance on corporate tax charged
on corporations (Steingold, 2018). These states include Ohio, Nevada, Texas, Wyoming,
Washington, and South Dakota. Unfortunately, the State of Illinois is exempted from this list.
Some of these states also do not impose personal income tax on individuals. Nevertheless, most
of the US states impose some form of business tax, for instance, franchise tax and privilege tax.
The privilege in this case is that of getting a chance to do business in the state (Steingold, 2018).

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These privilege taxes, however, depend significantly on the legal form of the company,
corporation, or business, an aspect that influences the qualification for business income tax
deductions as highlighted and discussed herein.
The State of Illinois imposes corporate income tax deductions, personal property
replacement tax deductions, and corporate franchise tax deductions. Apart from sole
proprietorship businesses, all other forms of businesses are mandated to file tax returns to one or
more of the three business income taxes highlighted in this case, which mean our client is
mandated to pay business income tax to the state government of Illinois. In addition, busi8nesses
that pass through the owner personally is subjected to tax deductions on the owners personal tax
returns as provided by the Illinois tax laws (Steingold, 2018).
With regard to the highlighted facts and statutory requirements for tax returns by
businesses in the State of Illinois, our client would be subjected to a flat rate of seven percent
charged as federal tax in business incomes given the nature of the business as an s corporation.
Notably, some adjustments have to apply with regard to the nature of business operations and
profitability among other factors (Steingold, 2018). The client should also be ready to file and
pay the tax returns on ...


Anonymous
Excellent resource! Really helped me get the gist of things.

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