You are currently working at a mid-sized certified public accounting firm. Your client is Bob Jones....

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You are currently working at a mid-sized certified public accounting 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 using that money to open a used car business that will be located at 210 Ocean 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, and bonds 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 $9,000,000 that Bob bought in 1966 for $450,000. 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. He is also considering transferring a possible 40% interest in his new business to his daughter Mandy, age 23 and single.

Prepare the appropriate page of Form 1040 and include the sale of the client’s land on the appropriate tax schedule and form for the recommended business entity. Be certain to complete each tax schedule and form accurately and completely. B. Prepare the appropriate schedule and tax forms to reflect taxable income based on your calculations and the disposition of asset. Be certain to complete each tax schedule and form accurately and completely. 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.

David · Accepted Answer

1040  U.S. Individual Income Tax Return  
 
First name and initial : Bob:::::::::::::::::: Last Name::::::::::::::::Jones 
social security number:N/A 
Filing Status:::::: 1) Single 
Exemptions: 
c) Dependents:  
First  Name: Mandy :::::::::::::::::: Last Name:::::::::::::::: Jones 
Dependent’s  social security number :::::::::::::::::::N/A
Dependent’s relationship :::::::::::::::::::::::::::::::::::Daughter
if child under age 17 ::::::::::::::::::::::::::::::::No
8a) Taxable interest:::::::::::::::::::::::::::::::::: $20,000  Attached Schedule B 
 
9 a) Ordinary dividends:::::::::::::::::::::::::::: $6,000  Attached Schedule B 
 
12 ) Business income:::::::::::::::::::::::::::::::: $300,000     SCHEDULE C
13 )  Capital gain   ::::::::::::::::::::::::::::::::::::$ 8,550,000 Attached Schedule D
22) Combine the amounts in the far right column for lines 7 through 21. 
 your total income ::::::::::::::::::::::::::::::::::::$8,876,000
37)Adjusted gross income ::::::::::::::::::::::::$ 8,876,000
38 ) Amount from line 37 (adjusted gross income) :::::::::::::: $8,876,000
40 ) Itemized deductions ::::::::::::::: $6,300 
 
41) Subtract line 40 from line 38 :::::::::::::::::::::::::::::::: $8,876,000  - $$6,300=$8,869,700 
 
42) Exemptions. If line 38 is $155,650 or less, multiply $4,050 by the number on line 6d.  
=0 
43 ) Taxable income::::::::::::::::: $8,869,700
Tax calculated as per 2016 rate
$130,578.50 + 39.6% of the amount over $466,950
$8,869,700  -$466,950=$8,402,750 *39.6/100=$3,327,489
$130,578.50 + $3,327,489 =$3458067.50
Deduction for Exemptions Worksheet—Line 42
2.) Multiply $4,050 by the total number of exemptions claimed on Form 1040, line 6d=$4050 
. 
3.)Enter the amount from Form 1040, line 38: =$8,869,700
4.)Enter the amount shown below for your filing status:::::::: 
Single —$259,400 
5.)Subtract line 4 from line 3. If the result is more than $122,500  Enter -0- on  
line 42    :::::::::::$8,869,700  -  $259,400=$8610300
SCHEDULE B
Interest and Ordinary Dividends  
Part I Interest 
1)  Interest  :::::::::::::::: $20,000   
2) Add the amounts on line 2 :::::::::::: $20,000   
3) Excludable interest on series EE  and I U.S. savings bonds :::::::::N/A 
Subtract line 3 from  line 2.  Enter  the  result here and on Form 1040, line 8a::::::::::::: 
$20,000   
 
Part II  Ordinary  Dividends  
1) Dividends::::::::::::::::::::: $6,000   
6) Add  the amounts on  line  5. Enter the total here  on  Form 1040, line 9a :::::::: $6,000
SCHEDULE D
Capital Gains and Losses
Part I Short-Term Capital Gains and Losses—Assets Held One Year or Less
7) Net  short-term  capital  gain  or  (loss)::::::::::::::::::::::  N/A
Part II)  Long-Term Capital Gains and Losses—Assets Held More Than One Year  
 
8a )Particulars ::::::::::::::::::::::Sales Price:::::::::::::::::Cost Price :::::::::::::Gain 
      Land::::::::::::::::::::::::::::::: $9,000,000:::::::::::::: $450,000:::::::::::::::: 8,550,000   
Part III  Summary 
 
16)  
Combine lines 7 and 15 and enter the result::::: 8,550,000  
If line 16 is a gain, enter the amount from line 16 on Form 1040,

You are currently working at a mid-sized certified public accounting 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...

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