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You are working as an accountant at a mid-size CPA firm. One of your clients is Bob Jones. Bob's personal information is as follows: DOB: October 10, 1952 SSN: 444-00-4444 Marital Status: Single Home Address: 5100 Lakeshore Drive, Pensacola, FL 32502 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 Mandyhis daughterin 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 Required: 2-3 PAGES A. Create a detailed tax planning proposal explaining how the client's family can experience tax savings should the client pass away. Cite relevant governing rules and regulations. B. Illustrate a strategic plan that addresses the need for a will in handling the estate. Detail what happens to the business, land, and investments consistent with tax codes and regulations. Consider extending the plan to address the client's estate tax, trust, and charitable contributions while minimizing estate tax. C. Recommend estate planning strategies consistent with tax codes and regulations for the purpose of reducing the taxable estate. Be sure to include gifting property to heirs in your response. D. Illustrate the best course of action if the client decides to leave the business in three years. Provide some advice to him should he decide to gift the business to his daughter or transfer the assets or common stock to her, depending on the business entity you have selected (partnership) E. Illustrate the best course of action if the client wishes to sell the business. Consider the tax consequences with regard to capital gains and losses, ordinary income issues, and selling an existing operating business. Please note that the business entity for Bob is a partnership and there are other papers like this which was done for other student I do not want that same paper I would appreciate an original document. Thanks in advance Running head: S-Corporation 1 Assignment Grading Course: Name S-Corporation Yours Name Professor's Name [optional] University S-Corporation 2 Tax Planning Proposal for S Corporation Here, Bob Jones's planning to transfer his business venture of S-Corporation by considering the Tax requirement that he doesn't to be a burden to his family and he is concerned about his death that's why wanted to distribute his Company's sharing to his daughter as an owner and want to hire a manager who can manage this business with 40% interest. Currently, his Company valued at t $53,000,000. This was an efficient efforts to covert this business in S-Corporation and now, his successive planning will come under the enactment of the American Taxpayer Relief Act (ATRA) that was proposed by Federal government in 2013. His Company will get tax exemption set at $5.43 million after his death in the year when he will die. Also, there are coupled of gift tax exemption of the same amount however, there are only few S-corporation come under Federal Estate Tax and according to Federal Government tax regulations for which he has to submit few documents such as, McEowen R. (2015); Buy-out agreement Will have to consider Not Making Gifts of Business Interests Will have to make his daughter as shareholder of the Company Due to limitation of business amount he has also need to make himself as shareholder before his death. Importantly, he has to the consider IRS guidelines which are under; [1] I.R.C. 336. [2] I.R.C. 1366(a). [3] I.R.C. 1367(a)(1). [4] I.R.C. 334. S-Corporation 3 In order to run his business under S-corporation and take the advantage of the shareholder's capital loss, and its gain must be considered for the same tax year, \"SOI Tax StatsS Corporation Statistics\". Strategic Planning Everybody knows in general, S-corporations doesn't divide among shareholders after the death of the owner means the deceased shareholder's estate can be able to leverage the steppedup basis of the deceased shareholder's stock to reduce tax on the sale of the assets. Therefore, to increase the liquidate, Bob has to transfer all the land and buildings even worth-able property in the name of his daughter, \"How to Step Up Basis Upon the Death of an S Corporation Shareholder\". Additionally, should distribute assets before his own death and later then it will be considered as a sale and a payment in exchange for the deceased shareholder's stock means a demand sale results will pass through the estate of the deceased shareholder under Code 1014. Estate Planning Strategies After Bob's on a part of counting his daughter as owner then his daughter or estate will automatically treated as a single shareholder. Additionally, manager will be treated for 40% interest from profit only. Now, their salaries will come under S-Corp and are subject to FICA tax (Social Security & Medicare tax) which currently count with 15.3 percent and except this amount Company will now come under distribution of additional profits which can be done without having any further FICA tax liability for the Company but they have to fill the Form S-Corporation 4 1120S along with IRS tax norms and a copy of the shareholders part should be delivered with Schedule K-1. After this, they require to fill only state income tax on earned value. Bob can help his daughter in tax exemption in landing, building, and other non-asset value by considering them as gift plan and give her under IRS rules and guidelines such as, McEowen R. (2015); [1] I.R.C. 336. [2] I.R.C. 1366(a). [3] I.R.C. 1367(a)(1). [4] I.R.C. 334. Transfer the Assets Historically, S-Corporation transition planning is difficult and require special attention in order to meet the distribution and tax exemption criteria for S-Corporation. For instance considering this case, it will eliminate Bob's own potential legal liabilities in the business means after considering the offer as gift things then it will be complicated either through Federal Estate Tax exemption of self-liability reduction. Under the IRS, Bob can get tax exemption on tangible property and can easily gift to his daughter but corporation should be taxed on a distribution of intangible assets (i.e., goodwill) under I.R.C. 311. In past, in the case of Cavallaro v. Comr., T.C. Memo. 2014-189, IRS asserted that no technology transfer had occurred and that the merger resulted in a gift from the parents to the son of $29.6 million. S-Corporation 5 Sell the Business This S-corporation based firm counted as individual business and requires individual tax return on business. Therefore, the Bob's business selling require to pass through and report as a capital gain means cannot be counted as ordinary income on individual tax returns which significantly defined under IRS S-Corporation regulations and now, S-Corporation comes under capital gain tax which will determine by Bob's firm stock basis, Karlinsky S. (2013). In IRS shareholders rules, S corporations bar regular C corporations from owning stock in S corporations and it will restrict under IRS code "338(h)(10) election" means purchase of SCorporation would happen through regular C-Corporation and all entities must come under 338(h)(10) election. However, firm's asset sale will under "38(h)(10) elections" which require to assign the valuations to all of the assets of the Bob's firm such as; inventory, fixed assets, customer lists and intangible assets. S-Corporation 6 References \"How to Step Up Basis Upon the Death of an S Corporation Shareholder\