Week 4 Project

 

The complete Writing Project and Presentation is found in Getting Started. Upload the portion of the project due this week.

Requirements:

Writing and interpreting results is a large part of your learning experience. These assignments are designed to improve your use of technology and communication skills. You will now be sharing your ideas with your classmates.  Create a PowerPoint presentation discussing the key elements of the writing project.  You may use the voice-over feature in PowerPoint to present your PowerPoint.

You will upload a copy of your PowerPoint or the YouTube link to this discussion board AND comment to at least 1 other student on his/her presentation that you watched. Please be sure the audio is clear and the file or link is accessible in the Week 4 Presentation discussion board

Due Dates: This presentation is due on Friday so others have time to comment on your work and you can respond back to them.

Grading Rubric: Please refer to the grading rubric in your grade book for specific requirements.

Library Assistance
Click on this document for assistance with your PowerPoint presentation  How to Access Tutorial for PowerPoint in the Library x How to Access Tutorial for PowerPoint in the Library x – Alternative Formats

Graded Activity:
Click on Getting Started to review the requirements for the writing project.  Then click the link above labeled “Part 4 Writing Project – Part 4 (Presentation)” to complete part 4 of the writing project and to comment to others on their presentations.

Solution1-3

13

)

5,000

)

)

tax expense

balance in TTD

balance in TTD

,000)

)

tax expense

$ 1,412,020

122,200

income tax provision

$ 4,513,000

0.34

at 34% [$4,525,000 x 34%]

1,700

Provision

$ 1,534,420

																																																																																																																																																																																																																							Problem 78
1. Compute TCFs current income tax expense or benefit for 2		0
	Income before income taxes	$ 4,52		5,000
	Interest from municipal bonds	(		10,000
	Nondeductible stock compensation
	DPAD		(8,000)
	Nondeductible fines		1,000
	Book equivalent of taxable income				$ 4,513,000
	Net change in cumulative TTD		(	500,000
	Net change in cumulative DTD			140,000
	Net change cumulative TD	(3	60,000
	Taxable income		$ 4,153,000
x 34%		0.34
			Current		$ 1,412,020
2. Compute TCF’s deferred income tax expense or benefit for 2013
		Ending	$ (1,870,000)
			Beginning	(	1,700
Increase in deferred tax liability	$ (	170,000
	Ending balance in DTD	$ 268,800
	Beginning balance in TTD	2	21,000
Increase in deferred tax asset	$ 47,800
				Deferred	$ 170,000
	Deferred tax benefit	(47,800)
	Net deferred tax expense	$	122,200
	Tax provision
	Current income tax expense
	Deferred income tax expense
		Total	$ 1,534,220
	Check
	Book equivalent of taxable income
x 34%
	Total income tax provision		$ 1,534,420
3. Prepare a reconciliation of TCF’s total income tax provision with its hypothetical income tax expense
Reconciliation of Effective Tax Rate	Dollars	Percent
	Provision	$ 1,5	38,500	34.00%	[$1,538,500/ $4,525,000]
Tax exempt interest ($10,000 x 34%)	(3,400)	-0.08%	[$3,400 / $4,525,000]
Nondeductible stock compensation ($5,000 x 34%)	0.04%	[$1,700 / $4,525,000]	All these number were changed
DPAD ($8,000 x 34%)	(2,720)	-0.06%	[$2,720 / $4,525,000]
Nondeductible fines ($1,000 x 34%)	340	0.01%	[$340 / $4,525,000]
33.91%

Solution4

d the year to 2013.

Beginning
Current

Ending

Deferred

Cumulative
Deferred

Change
T/D

BOY
Beginning
Current
EOY
Ending

Cumulative
Deferred
Year
Cumulative
Deferred

Temporary Differences

T/D
Taxes (@ 34%)
Change
T/D
Taxes (@ 35%)

Current

10,000

38,500

0
0

20,000

100,000
34,000

10,000
60,000
21,000

500,000
170,000
100,000

110,000

Total

140,000

Beginning balance in TTD

(1,700,000)

Ending balance in DTD

Beginning balance in TTD

221,000

Deferred tax benefit

Net deferred tax expense

Income before income taxes

Interest from municipal bonds

Nondeductible stock compensation

5,000

DPAD

(8,000)

Nondeductible fines

1,000

Book equivalent of taxable income

$ 4,513,000

Net change in cumulative TTD

(500,000)

Net change in cumulative DTD

140,000

Net change cumulative TD

Taxable income

$ 4,153,000

Tax provision

Current income tax expense

$ 1,453,550

Deferred income tax expense

169,500

Total income tax provision

Check

Book equivalent of taxable income

$ 4,513,000

0.35

Total income tax provision

4. Assume TCF’s tax rate increased to 35% in 2013.
Recompute TCF’s deferred income tax expense or benefit for 2013 using the following template:			Change
Tulip City Flowers, Inc.
Temporary Difference Scheduling Template
	BOY		EOY
Taxable (Favorable)				Cumulative		Year
	Temporary Differences				T/D		Taxes (@ 34%)		Taxes (@ 35%)
Non-current
Accumulated depreciation	(5,000,000)		(1,700,000)	(500,000)	(5,500,000)	(1,925,000)
Deductible (Unfavorable)
Allowance for bad debts			100,000		34,000		110,000
Prepaid income		20,000	7,000
Total current	30,000	130,000	45,500
Non-Current
Deferred compensation	50,000	17,000
Accrued pension liabilities	600,000	210,000
Total non-current	550,000	187,000	660,000	231,000
650,000		221,000	790,000	276,500
Ending balance in TTD	$ (1,925,000)
Increase in deferred tax liability (expense)	$ (225,000)
$ 276,500
Increase in deferred tax asset (benefit)	$ 55,500
Deferred tax expense	$ 225,000
(55,500)
$	169,500
Recompute TCFs current income tax expense or benefit for 2012
$ 4,525,000	(10,000)	(360,000)
x 35%		0.35
Current tax expense		$ 1,453,550
$ 1,623,050
x 35%
$ 1,579,550
The check procedure no longer works because the tax rate changed from the beginning to the end of the year.
The difference of $43,500 ($1,623,050 – $1,579,550) results from tax effecting the net cummulative book differences at the beginning of
of year ($4,350,000) times the change in tax rate (1%).

2

Memo on U.S Tax System

Valery Salazar

Keiser University

Corporate Business, and Trust Tax

Gregory Gosman

February 17, 2023

MEMO

To: Our Valued Client

From:

Tax Professional

Date:21/2/2023

Re Legal Entities Recognized by the US Tax System

Introduction

As your tax advisor, I have looked through your current setup as a sole proprietorship and would like to give you a rundown of the legal entities allowed by the US tax system and the key distinctions between them. Furthermore, I will cover the pros and cons of switching from being a single proprietor to becoming a corporation. Lastly, I will discuss the norms and practices that underpin professional ethics in the context of corporate, commercial, and trust taxes.

Legal Entities and Their Characteristics

The US tax system recognizes four distinct types of legal entities;

1. Sole Proprietorships

2. Partnerships

3. Corporations

4. Limited Liability Corporation (LLC)

Sole Proprietorship: A sole proprietorship is a business owned and operated by a single person. To whatever extent a firm incurs debt or liability, such debt or liability is ultimately the owner’s responsibility. The proprietor’s tax return is where the company’s earnings and losses are detailed (Pfeifer & Yoon, 2019).

Partnership: When many people share company ownership, it is called a partnership. Each partner has individual responsibility for the company’s debts and obligations. Partners must include partnership income and losses on tax filings (Greenman et al., 2021). A partnership is company ownership and management in which two or more individuals work together to run the show on Florida business. There are many distinct kinds of partnerships, such as general, liability, and limited liability partnerships. The partners must pay any debts or liabilities, and any profits or losses must be included in the partners’ individual tax filings (Lidstone, 2021).

Corporation: When its stockholders form a company, it becomes a distinct legal entity. A shareholder’s liability is limited to the amount invested in a company, whereas the business is accountable for its debts and obligations. A company’s legal structure consists of a board of directors, officials, and shareholders and may issue shares to provide financial backing.

Limited Liability Company (LLC): LLCs are special business organization that incorporates the advantages of corporations and partnerships (Hatfield, 2019). A limited liability company (LLC) functions similarly to a corporation in that its owners are shielded from legal responsibility for the debts and actions of the business while still being taxed as a partnership.

Advantages and Disadvantages of Changing from Individual Ownership to Corporate Structure.

There are positive and negative aspects to transforming a single proprietorship into a corporation.

Advantages:

· Limited liability protection: As a general rule, a shareholder’s assets are shielded from the debts and liabilities of a company because of the limited liability protection afforded by the entity’s structure.

· Ability to raise capital: Stock offerings are popular for corporations to generate finance, especially when expanding their operations.

· Tax advantages: Healthcare insurance, like other employee benefits, may be deducted by a business, and tax rates for corporations can be lowered.

Disadvantages:

· Increased complexity and cost: Compared to a sole proprietorship, operating a corporation involves more paperwork, legal expenses, and regular upkeep. It might also need more staff to deal with the ensuing influx of work.

· Double taxation: To put it another way, a company’s earnings are taxed twice: once by the business itself and once by the shareholders who own its shares.

· Less flexibility: Corporations have less leeway than single proprietorships since they must adhere to additional formalities and rules.

Ethical Principles and Professional Conduct Linking to Corporate, and Trust Taxation

As a tax advisor, I have vowed always to act professionally and ethically while dealing with client matters, including business, trust, and corporate taxes. This includes telling the truth, not misleading others, avoiding conflicts of interest, and following all relevant laws and regulations.

Conclusion

In summary, In the United States, there are four distinct types of legal entities, each with its own set of benefits and drawbacks for tax purposes. Limited liability, access to financial markets, and favorable tax treatment are some benefits that may be gained by transforming a sole proprietorship into a corporation.

Sincerely,

Tax Professional

References

Greenman, C., Esplin, D., Johnston, R., & Richards, J. (2021, July 7).
Understanding Ethics in the Varying Segments of the Accounting Profession. Papers.ssrn.com.

https://ssrn.com/abstract=3882222

Hatfield, M. (2019). Professionally Responsible Artificial Intelligence.
Arizona State Law Journal,
51, 1057.

https://heinonline.org/HOL/LandingPage?handle=hein.journals/arzjl51&div=33&id=&page=

Lidstone, H. K. (2021). LLC or Inc.? Entity Selection for a Small Business.
SSRN Electronic Journal.

https://doi.org/10.2139/ssrn.3938182

Pfeifer, M. G., & Yoon, S. J. (2019). IRS weapons against aggressive tax planning1.
Trusts & Trustees,
25(1), 69–74.

https://doi.org/10.1093/tandt/tty170

2

Simple Heart

Valery Salazar

Keiser University

Gregory Gosman, C.P.A

Corporate, Business, and Trust Tax

February 12, 2023

MEMO

To: Our Valued Client

From:

Tax Professional

Date:2/2/2023

Re: Four Different Legal Entities Recognized by the US Tax System

This memo is intended to provide an overview of the four different legal entities recognized by the US tax system and the fundamental differences in the characteristics across business entities, as well as the pros and cons of transitioning from a sole proprietorship to a corporation. Additionally, the principles of ethical and professional conduct relating to corporate, business, and trust taxation will be discussed.

The four legal entities that are recognized by the US tax system are sole proprietorships, partnerships, corporations, and limited liability companies (LLCs) (Greenman et al., 2021). These entities differ in terms of the way they are taxed, the way they are managed, and the level of liability that owners have for the debts of the business.

A sole proprietorship is the simplest and most common business structure. One person owns and manages them, and that person is liable for all financial obligations. A sole proprietorship may be set up quickly and easily, with no additional paperwork or registrations needed at the state level. [Title of book] (Lidstone, 2021). They are also relatively inexpensive to operate, as the owner does not have to pay any taxes on the business’s profits. The downside of a sole proprietorship is that the owner is personally liable for any debts or legal claims against the business.

Similarly, to how one person may own and operate a sole proprietorship, two or more individuals can own and operate a partnership. However, each partner is personally liable for any debts or legal claims against the business (Hatfield, 2019). Partnerships also do not require any special filing with the state and are relatively inexpensive to operate. The upside of a partnership is that the profits are split between the partners, which can be beneficial for tax purposes.

Corporations are more complex than sole proprietorships and partnerships, as they are distinct authorized organizations from their proprietors. This means that the owners are not personally liable for any of the business’s debts or legal claims (Lidstone, 2021). Corporations are also more expensive to set up and operate, as they require special filing with the state and must pay taxes on their profits. The upside of a corporation is that the owners can benefit from limited liability protection, which can be beneficial in certain situations.

In many ways, limited liability companies (LLCs) combine the best features of corporations and partnerships. As separate and distinct entities from their owners, the owners cannot be held liable for the business’s debts or legal claims. Creating and running an LLC also has a low financial impact (Uzoka, 2023). If the business owner has a higher marginal tax rate than the firm, then more of the business’s profits will be subject to that higher rate.

When considering whether to transition from a sole proprietorship to a corporation, there are several factors to consider. One of the main advantages of transitioning to a corporation is the limited liability protection afforded to the owners. This implies that the proprietors are never individually accountable for any of the company’s liabilities or legal demands, which might give more security in certain circumstances (Lidstone, 2021). Corporations can benefit from certain tax advantages, such as the ability to deduct business expenses from taxable income.

However, there are also some potential disadvantages of transitioning to a corporation. Corporations are more expensive to set up and operate than sole proprietorships, as they require special filing with the state and must pay taxes on their profits. Additionally, the owners of the corporation must comply with certain legal requirements, such as holding annual meetings and filing annual reports.

The principles of ethical and professional conduct relating to corporate, business, and trust taxation are based on standards and practices that are set forth by the Internal Revenue Service (IRS) (Pfeifer & Yoon, 2019). These standards and practices include the obligation to accurately report income and other taxable items, the responsibility to pay taxes in a timely manner, and the requirement to keep accurate records of all financial transactions (Pfeifer & Yoon, 2019). Additionally, tax professionals must adhere to certain ethical codes of conduct, such as acting in the best interests of their clients and treating them with respect.

In conclusion, it is important to understand the four different legal entities recognized by the US tax system, as well as the fundamental differences in the characteristics across these entities. Additionally, when considering a transition from a sole proprietorship to a corporation, it is essential to weigh the pros and cons of such a move. Tax professionals must adhere to certain ethical and professional standards when dealing with corporate, business, and trust taxation.

I appreciate your taking the time to read this. Should you have additional concerns or would want to pursue this matter deeper, please get in touch with us.

Sincerely,

Tax Professional

References

Greenman, C., Esplin, D., Johnston, R., & Richards, J. (2021, July 7).
Understanding Ethics in the Varying Segments of the Accounting Profession. Papers.ssrn.com. https://ssrn.com/abstract=3882222

Hatfield, M. (2019). Professionally Responsible Artificial Intelligence.
Arizona State Law Journal,
51, 1057. https://heinonline.org/HOL/LandingPage?handle=hein.journals/arzjl51&div=33&id=&page=

Lidstone, H. K. (2021). LLC or Inc.? Entity Selection for a Small Business.
SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3938182

Pfeifer, M. G., & Yoon, S. J. (2019). IRS weapons against aggressive tax planning1.
Trusts & Trustees,
25(1), 69–74. https://doi.org/10.1093/tandt/tty170

Uzoka, N. C. (2023). ADOPTING A LIMITED LIABILITY PARTNERSHIP FOR THE LEGAL PROFESSION: A CRITICAL REVIEW FROM NIGERIA’S PERSPECTIVE.
LAW and SOCIAL JUSTICE REVIEW,
3(2). https://nigerianjournalsonline.com/index.php/LASJURE/article/view/2969