You are a Senior Manager with a large consulting firm looking to become partner in that firm. You need to convince an engineering firm that is taking the next step in its progression of growth. Currently the firm is headquartered in Pennsylvania with a gentleman named Jeff Bezos as the current owner. There are multiple parts. The engineering firm’s idea is as follows:

(i) Have manufacturing take place via 3D printers in key states. The key states would be obviously Pennsylvania, but also in Nevada, Texas and Florida. A light might be triggered by those three other states for tax reasons. The 3D printers would manufacture any product or part needed in a matter of minutes. Those manufactured parts could be shipped or sent via drone to any customer. By doing this, customers could eliminate large inventories and the storage of said inventories. Mr. Bezos is concerned about the state taxation/apportionment of income. Please describe, in detail, apportioning of income for state income taxation.

(ii). Also discuss the recent changes in the federal taxation especially with respect to entities. Mr. Bezos, he insists you call him Jeff, is also interested in your knowledge of the marginal, average and effective tax rates. In addition, any information you can give him regarding about income shifting, net present value, differences between permanent and temporary differences, etc, is going to go a long way to landing this engagement.

(iii) There is the question of what type of entity Jeff is looking at for growth and limited liability. A full discussion of the characteristics and functionality is needed as well. Tax attributes and accounting attributes of the entities and how they operate is important as well. Jeff has been going through changes in his life and it appears he will need to bring in more partners for this venture. Tell Jeff your detailed thoughts on this entity structure.

(iv). Jeff is also interested in your knowledge of depreciation. He has heard of a special expensing of depreciation. Can he do it? He plans to spend $500 million dollars in equipment purchases this year alone. He wants to know his consulting firm can perform basic depreciation. He gives you two pieces of property-a seven property (office furniture) and a five year property (computer) for you to calculate depreciation for three years. Jeff spent One Hundred Thousand ($100,000.00) dollars on the office furniture and ten Thousand ($10,000) dollars on the computer. Calculate the depreciation below:

MACRS

3 Year 5 year 7 year

1 33.33 20.00 14.29

2 44.45 32.00 24.49

3 14.81 19.20 17.49

4 7.41 11.52 12.49

(v). Jeff is also concerned as an individual how these changes will affect him personally as well. He has not filed his tax returns for the last two years due to his divorce. What can you type him about the tax compliance process?

Remember, Jeff Bezos is across the table from you. Your partnership entrance is contingent upon your adequately explaining in detail the above mentioned topics plus any other relevant and pertinent information you have knowledge and you think would be helpful to Jeff and for you too land this engagement.