ACCTMIS 4784 RESEARCH MEMO & CLIENT LETTER ASSIGNMENT Client Facts: The Buckeye Transit Corp. is a transit system operating in Columbus for the convenience of MBA students. This year, the railway needs to replace a section of track. It is estimated the total cost of the track will be $1,750,000, as follows: Cost of new track $875,000 Installation $475,000 Leveling of road and improvements $250,000 Removing of old track (net, salvage value) $150,000 The old track is fully depreciated, and the cost shown is net of a $25,000 salvage value received for scrap metal. The new track is expected to last 30 years. Rick Zach, the CFO of Ohio Railway, has hired you to determine the tax treatment of the above expenditures Specifically, he wants to know if any costs can be deducted (and when), or if all must be capitalized and depreciated over a number of years. He is interested in knowing the depreciation period (recovery period) if relevant for each portion of the costs. He has also indicated that the company won't take any Section 179 expense or Bonus Depreciation (if available), so you can ignore this in your research. Also, he is not interested in any tax credit provisions for railroads included in the IRC. Directions: You will submit a Word document (single-spaced) consisting of the following: A letter to Rick Zach, summarizing the results of your tax research (one page) A file memo, providing a summary of your research (and the appropriate primary source citations), no more than 3 pages in length. You might consider consulting secondary source materials in addition to the primary sources you will cite in your file memo. In addition to using the Internal Revenue Code, you should review the related Treasury Regulations. You will also find some guidance in the form of a Revenue Ruling. Refer to Chapter 11 of the textbook for information on how to prepare each of the required documents. Your assignment will be evaluated for thoroughness, accuracy, and presentation (formatting spelling, grammar, etc.) You may work with a partner on this assignment. ACCTMIS 4784 RESEARCH MEMO & CLIENT LETTER ASSIGNMENT Client Facts: The Buckeye Transit Corp. is a transit system operating in Columbus for the convenience of MBA students. This year, the railway needs to replace a section of track. It is estimated the total cost of the track will be $1,750,000, as follows: Cost of new track $875,000 Installation $475,000 Leveling of road and improvements $250,000 Removing of old track (net, salvage value) $150,000 The old track is fully depreciated, and the cost shown is net of a $25,000 salvage value received for scrap metal. The new track is expected to last 30 years. Rick Zach, the CFO of Ohio Railway, has hired you to determine the tax treatment of the above expenditures Specifically, he wants to know if any costs can be deducted (and when), or if all must be capitalized and depreciated over a number of years. He is interested in knowing the depreciation period (recovery period) if relevant for each portion of the costs. He has also indicated that the company won't take any Section 179 expense or Bonus Depreciation (if available), so you can ignore this in your research. Also, he is not interested in any tax credit provisions for railroads included in the IRC. Directions: You will submit a Word document (single-spaced) consisting of the following: A letter to Rick Zach, summarizing the results of your tax research (one page) A file memo, providing a summary of your research (and the appropriate primary source citations), no more than 3 pages in length. You might consider consulting secondary source materials in addition to the primary sources you will cite in your file memo. In addition to using the Internal Revenue Code, you should review the related Treasury Regulations. You will also find some guidance in the form of a Revenue Ruling. Refer to Chapter 11 of the textbook for information on how to prepare each of the required documents. Your assignment will be evaluated for thoroughness, accuracy, and presentation (formatting spelling, grammar, etc.) You may work with a partner on this assignment
