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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 inPensacola, Florida. Bob has estimated that the business might make $300,000 in taxable income. Bobs 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. Heis also considering transferring a possible 40% interest in his new business to his daughter Mandy, age 23 and single.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 elementsmust be addressed:I. MemorandumA. Recommend a type of business entity for the client to consider based on your tax research. Consider justifying your recommendation using thecode and regulations that relate to the business entity.B. Differentiate between accrual accounting and cash basis. Based on the type of business and the clients accounting system, what is the impactwhen 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 accrualreporting differs from cash basis.D. Determine the economic impacton the clients financial situation. Based on your decision, determine the potential tax liability, keeping in mindappropriate 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, brokers fees,closing costs, appraisals, and surveys and the correct 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 liabilityissues based on the potential economic impact and appropriate Internal Revenue Code and Treasury regulations.G. Describe the tax effecton the recommended business entity and the impact it will have on the clients personal tax return. Consider addressinghow the business entity affects the completion of the 1040 tax form.II. ConclusionA. Evaluate the economic impact on the clients personal returns based on the recommended entity. Justify why the client would not choose theother business entities by informing the client of the differences.B. Justify your recommendation regarding the clients daughter having an ownership interest. Provide details supporting the recommendationtaking into consideration the jargon and mechanics of the transaction.C. Summarize, using moral reasoning, cash or accrual basis accounting systems in relation to the selected business entity. Consider how theaccounting system impacts revenue recognition, consistent with Internal RevenueCode and Treasury regulations.D. Describe the after tax effects on the clients cash flow based on the sale of the land that is needed to provide the funds necessary to start thebusiness. 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 RevenueCode andTreasury regulations. Consider the type of business and the tax effect whether it is salary, dividends,or cash withdrawal.III. AppendixBased on your recommendation to the client regarding proprietorship, taxable income, and sale of land, complete the appropriate tax schedules andforms described below.A. Prepare the appropriate page of Form 1040 and include the sale of the clients land on the appropriate tax schedule and form for therecommended 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 tocomplete 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 economicsolutions for the client. Consider providing real-world examples to support your claims.MilestonesMilestone One:Gross Income and Capital GainsIn Module Three, you will submit a draft of the gross income and capital gains, analyzing the following critical elements:I. Memorandum, section E, and II.Conclusion, sections Dand E. You must compute the property disposition capital gain and taxation of gross income.In completing this assignment, consider thetax effect of salary dividends or cash withdrawal in accordance with Internal Revenue Code and Treasury regulations. This assignment will be submitted as aWord document. This milestone is graded with the Milestone One Rubric.