TAX 650 Milestone Two Guidelines and Rubric In this milestone, you will write a memorandum to the client described in the final project data sheet. You will differentiate between accrual accounting...

TAX 650 Milestone Two Guidelines and Ru
ic

In this milestone, you will write a memorandum to the client described in the final project data sheet. You will differentiate between accrual accounting and
ash basis methods, describe when revenue would be recognized, determine the economic impact to your client, and summarize your recommended accounting
method for the client.

Specifically, the following critical elements must be addressed:

1. Differentiate between accrual accounting and cash basis. Based on the type of business and the client’s accounting system, what is the impact when the
evenue is recognized? Which option would you recommend for the client?
2. Based on the decision of accrual versus cash basis, describe when revenue would be recognized on the sale of inventory and how the accrual reporting
differs from cash basis.
3. Determine the economic impact on the client’s financial situation. Based on your decision, determine the potential tax liability, keeping in mind
appropriate Internal Revenue Code and Treasury regulations.
4. Summarize the cash or accrual accounting method in relation to the selected business entity.

Ru
ic

Guidelines for Submission: Your memorandum must be submitted as a 2- to 3-page Microsoft Word document with double spacing, 12-point Times New Roman
font, one-inch margins, and at least three sources cited in APA format.

Critical Element Proficient (100%) Needs Improvement (75%) Not Evident (0%) Value
Accrual Accounting vs. Cash
Basis
Differentiates between accrual
accounting and cash basis and
identifies the impact of the revenue
Differentiates between accrual
accounting and cash basis and
identifies the impact of the revenue,
ut the details are inaccurate or
cursory
Does not differentiate between
accrual accounting and cash basis or
does not identify the impact of the
evenue
25
Revenue Recognized on the
Sale
Describes when revenue would be
ecognized and how the reporting
differs for accrual accounting vs.
cash basis
Describes when revenue would be
ecognized and how the reporting
differs but details are inaccurate or
cursory
Does not describe when revenue
would be recognized or how the
eporting differs
25
Economic Impact Determines the economic impact on
the client’s financial situation and
potential tax liability, and
determinations are consistent with
Internal Revenue Code and Treasury
egulations
Determines the economic impact on
the financial situation and potential
tax liability, but either the
eferenced Internal Revenue Code
and regulations are inaccurate or
details are cursory
Does not determine the economic
impact on the financial situation and
potential tax liability
20
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Critical Element Proficient (100%) Needs Improvement (75%) Not Evident (0%) Value
Summary: Cash or Accrual
Accounting Method
Summarizes cash or accrual basis
accounting systems in relation to
the selected business entity
consistent with appropriate Internal
Revenue Code and Treasury
egulations
Summarizes cash or accrual basis
accounting systems in relation to
the selected business entity, but
details either are cursory or contain
inaccuracies
Does not summarize cash or accrual
asis accounting systems in relation
to the selected business entity
20
Articulation of Response Submission has no major e
ors
elated to citations, grammar,
spelling, syntax, or organization
Submission has major e
ors related
to citations, grammar, spelling,
syntax, or organization that
negatively impact readability and
articulation of main ideas
Submission has critical e
ors
elated to citations, grammar,
spelling, syntax, or organization that
prevent understanding of ideas
10
Total 100%


TAX 650 Final Project Guidelines and Ru
ic

Overview
The final project for this course is the creation of a memorandum with appendix.

As an associate working in a privately held enterprise or working with privately held clients, it is imperative to be able to advise clients on the tax implications of
their financial investments. The ability to model the tax consequences of transactions and do cost benefit analysis is crucial.

For your final project, you will model the role of an associate working in a private consulting firm. You will demonstrate your ability to advise clients on whether
they should operate as a sole proprietor, a partnership, an S corporation, or a C corporation. Additionally, using your tax research skills and understanding of
federal income taxation, you will have the opportunity to evaluate tax consequences from sales and distributions for their compliance with the Internal Revenue
Code and Treasury regulations. The use of appropriate tax authority research is expected throughout the assignment, as its use is required by the Internal
Revenue Service (IRS).

The project is divided into four milestones, which will be submitted at various points throughout the course to scaffold learning and ensure quality final
submissions. These milestones will be submitted in Modules Three, Five, Seven, and Eight. The final product will be submitted in Module Nine.

In this assignment, you will demonstrate your mastery of the following course outcomes:

 Recommend an appropriate business tax entity based on the analysis of a tax situation for achieving favorable economic impact on the client’s taxable
income
 Utilize appropriate tax forms and schedules that compute taxable income on individual tax returns and reflect versatility of thought, resulting in the best
economic solution for the individual taxpayer
 Apply accrual and cash basis accounting best practices and moral reasoning in determining when business transactions may be reported for income tax
purposes
 Assess the economic impact on taxable income for the business tax entity in relation to Internal Revenue Code and Treasury regulations and the optimum
desired outcomes for the client
 Evaluate the tax consequences that result from sales or distributions of property for their compliance with IRS Circular 230, Internal Revenue Code, and
the American Institute for Certified Public Accountants and for advising the client
Prompt
You are cu
ently working at a mid-sized certified public accounting firm. Your client is Bob Jones. Bob has hired your firm for professional advice regarding
whether he should operate as a sole proprietor, a partnership, an S corporation, or a C corporation.
Using the supplied Data Sheet for Final Project document, prepare a memorandum to the client recommending a type of business entity, including an appendix
of supporting IRS tax schedules and forms.

Specifically, the following critical elements must be addressed:

I. Recommendation
A. Recommend a type of business entity for the client to consider based on your tax research. Consider justifying your recommendation using the
code and regulations that relate to the business entity.
B. Differentiate between accrual accounting and cash basis. Based on the type of business and the client’s accounting system, what is the impact
when revenue is recognized?
C. Based on the decision of accrual vs. cash basis, describe when revenue would be recognized on the sale of inventory, and how the accrual
eporting differs from cash basis.
D. Determine the economic impact on the client’s financial situation. Based on your decision, determine the potential tax liability, keeping in mind
appropriate Internal Revenue Code and Treasury regulations.
E. Identify the tax consequences on the sale or exchange of the land consistent with capital gain rules. Consider the selling expense,
oker’s fees,
closing costs, appraisals, and surveys and the co
ect schedule form to complete.
F. Justify whether or not the client should choose a business entity that has limited liability protection. Be sure to include possible future liability
issues based on the potential economic impact and appropriate Internal Revenue Code and Treasury regulations.
G. Describe the tax effect on the recommended business entity and the impact it will have on the client’s personal tax return. Consider addressing
how the business entity affects the completion of the 1040 tax form.

II. Conclusion
A. Evaluate the economic impact on the client’s personal returns based on the recommended entity. Justify why the client would not choose the
other business entities by informing the client of the differences.
B. Justify your recommendation regarding the client’s daughter having an ownership interest. Provide details supporting the recommendation
taking into consideration the jargon and mechanics of the transaction.
C. Summarize cash or accrual basis accounting systems in relation to the selected business entity. Consider how the accounting system impacts
evenue recognition consistent with Internal Revenue Code and Treasury regulations.
D. Describe the after tax effects on the client’s cash flow based on the sale of the land that is needed to provide the funds necessary to start the
usiness. Consider including capital gains tax rules.
E. Explain whether or not the client and his child should take a salary or cash distribution according to tax purposes and Internal Revenue Code
and Treasury regulations. Consider the type of business and the tax effect whether it is salary, dividends, or cash withdrawal.

III. Appendix
Based on your recommendation to the client regarding proprietorship, taxable income, and sale of land, complete the appropriate tax schedules and
forms described below.
A. Prepare the appropriate schedule(s) and tax form(s) for the recommended business entity.
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B. Prepare the appropriate pages of Form 1040 including all relevant tax schedules and forms to reflect taxable income based on your calculations
and the disposition of assets.
C. Illustrate how creative problem solving and versatility of thought impact professional advice that you intended to result in the best economic
solutions for the client. Consider providing real-world examples to support your claims.
Milestones
Milestone One: Gross Income and Capital Gains
In Module Three, you will submit a draft of the gross income and capital gains, analyzing the following critical elements: I. Recommendation, Section E, and II.
Conclusion, Sections D and E. You must compute the property disposition capital gain and taxation of gross income. In completing this assignment, consider the
tax effect of salary dividends or cash withdrawal in accordance with Internal Revenue Code and Treasury regulations. This assignment will be submitted as a
Word document. This milestone is graded with the Milestone One Ru
ic.

Milestone Two: Revenue Recognition and Accounting Methods
In Module Five, you will submit a draft of the revenue recognition and accounting methods, summarizing the following critical elements: I.