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You are currently working at a mid-sized certified publicaccounting firm. Your client is Bob Jones. Bob, age 60 and single,has recently retired from IBM. He has $690,000 available in his401(k) fund and he is thinking of using that money to open a usedcar business that will be located at 210 Ocean View Drive inPensacola, Florida. Bob has estimated that the business might make$300,000 in taxable income. Bob’s personal wealth includinginvestments in land, stocks, and bonds is about $14,000,000. Hereported an interest income of $20,000 and dividend income of$6,000 last year. The $14,000,000 includes land worth $9,000,000that Bob bought in 1966 for $450,000. Bob has hired your firm forprofessional advice regarding whether he should operate as a soleproprietor, a partnership, an S corporation, or a C corporation. Heis also considering transferring a possible 40% interest in his newbusiness to his daughter Mandy, age 23 and single. Specifically,the following critical elements must be addressed: A. Differentiatebetween accrual accounting and cash basis. Based on the type ofbusiness and the client’s accounting system, what is the impactwhen revenue is recognized? Which option would you recommend forthe client? B. Based on the decision of accrual vs. cash basis,describe when revenue would be recognized on the sale of inventory,and how the accrual reporting differs from cash basis. C. Determinethe economic impact on the client’s financial situation. Based onyour decision, determine the potential tax liability, keeping inmind appropriate IRS code and regulations. D. Summarize, usingmoral reasoning, the cash or accrual accounting method in relationto the selected business entity

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You are currently working at a mid-sized certified publicaccounting firm. Your client is Bob Jones. Bob, age 60 and single,has recently retired from IBM. He has $690,000 available in his401(k) fund and he is thinking of using that money to open a usedcar business that will be located at 210 Ocean View Drive inPensacola, Florida. Bob has estimated that the business might make$300,000 in taxable income. Bob’s personal wealth includinginvestments in land, stocks, and bonds is about $14,000,000. Hereported an interest income of $20,000 and dividend income of$6,000 last year. The $14,000,000 includes land worth $9,000,000that Bob bought in 1966 for $450,000. Bob has hired your firm forprofessional advice regarding whether he should operate as a soleproprietor, a partnership, an S corporation, or a C corporation(in which I chooses a sole proprietor). He is alsoconsidering transferring a possible 40% interest in his newbusiness to his daughter Mandy, age 23 and single.

REQUIRED:

1. Illustrate how creative problem solving and versatility ofthought impact professional advice that you intended to result inthe best economic solutions for the client. Consider providingreal-world examples to support your claims.

ou are currently working at a mid-sized certified publicaccounting firm. Your client is Bob Jones. Bob, age 60 and single,has recently retired from IBM. He has
$690,000 available in his 401(k) fund and he is thinking of usingthat money to open a used car business that will be located at 210Ocean View Drive in
Pensacola, Florida. Bob has estimated that the business might make$300,000 in taxable income.
Bob’s personal wealth including investments in land, stocks, andbonds is about $14,000,000. He reported an interest income of$20,000 and dividend income of
$6,000 last year. The $14,000,000 includes land worth $9,000,000that Bob bought in 1966 for $450,000.
Bob has hired your firm for professional advice regarding whetherhe should operate as a sole proprietor, a partnership, an Scorporation, or a C corporation. He
is also considering transferring a possible 40% interest in his newbusiness to his daughter Mandy, age 23 and single.

Calculate the property disposition capital gains and taxation ofgross income.

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.

Please help me to Interpret the tax law pertaining to a S corporation business and justify my recommendation using details consistent with tax law, code, and regulations.

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