You are a staff accountant at the well-known tax consultants Goldberg and Debit, CPAs.

Late in the afternoon on the Friday before the Memorial Day weekend, senior tax partner Johnny Debit calls you into his office.

Thanks for coming the senior partner greets you. (And thanks for not taking the pods out of your earsGod forbid you should actually hear what Im saying).

No problem sir. (Like I had a choice.)

I know this is very last minute, but could you address, in a detailed memo, concerns raised by our client Comp-U-Big. (If you only knew Ive been sitting on this since Monday.)

Sir, it would be my honor to work all weekend on this (While youre off at the shore; I hope youre eaten by wild animals.)

Great!ambition becomes a staff person. (Like I didnt notice your sarcasm.)

What exactly is the problem sir? (Other than youre being a disorganized schmuck.)

Well, as you know, Comp-u-Big ships a lot of computer supplies to customers in the State of Latka. It looks like the Latka tax committees have drafted a new income tax law that will adversely affect Comp-u-Big. They have not yet passed a bill out of committee but it is said to have the support of Governor Moonbeam. Could you find a copy of the proposed bill language and analyze it to see how it might affect Comp-u-Big. I heard on TV this morning that there might be some constitutional issues with the Latka law. Im not actually sure what that means. I have a three day bachelor party this weekend so I really cant answer any questions. But leave me a voice mail later tonight to let me know how you are doing. And please start the memo. I hope this doesnt mess up your weekend plans. (And even if it doeswhy is that my problem?)

Ill get on this right now, sir! ($%^& you and the horse you rode in on!)

You return to your desk and find on the Latka legislative website the draft language of the proposed law:

Tax Reform and Full Employment Tax Act of 2022

Section 1: Name of Law

This law may be cited as the Tax Reform and Full Employment Tax Act of 2022 (TRFETA).

Section 2: Imposition of Tax

This law imposes an income tax on entire net income of corporations doing business under Section 3.

Section 3: Subjectivity to Tax

TFETA is imposes on all corporations organized in Latka and all corporations organized outside Latka but which do business in Latka including the sending of salespersons into Latka whose activities are limited to the solicitation of items of tangible personal property or whom earn income from sources within Latka. Companies meeting these criteria are subject to tax for the next 8 years.

Section 4: Definition.

Entire net income is defined as federal taxable income computed utilizing the internal revenue code as it was constituted on December 31, 2014 adjusted by the Section 5 modifications.

Section 5: Modifications.

Entire net income is adjusted by adding back to federal taxable income any accelerated depreciation deducted for federal income tax purposes

Section 6: Division of Income.

Taxpayers will self-assess tax based up their Latka sourced income. To determine their Latka sourced income, their entire net income will the higher of:

1. The entire net income times the percentage of payroll employed in Latka divided by total payroll incurred anywhere in the world or

1. The amount of income taxable in Latka determined by separate accounting

Section 7: Computation of Tax.

The tax will be computed my multiplying sourced Latka income times the applicable tax rate. The applicable tax rate for corporations organized and incorporated in Latka is 5 percent. Nonresident corporations will pay a tax of 7 percent except that a tax credit will be available equal to 10 percent of a foreign corporations Latka payroll or 15% of the companys payroll. Whichever is higher.

Section 8: Severability.

If any of the provisions of this Act are found to be contrary to the provisions of the United States Constitution, the remaining provisions of the law will be rendered null and void.

By 1:00 AM Saturday Morning, you have developed the following Facts section of the memo:

To: Tax FilesComp-u-Big

From: [Insert your name]

Subject: How New Latka Law Will Affect Comp-U-Big

Facts:

Comp-u-Big (the Company) is a corporation organized under the laws of Nevada with headquarters in New York City. The Company sells computer accessories such as power cords, and routers. All its inventory is held in a New York warehouse. Other than its salesforce, the Company has no employees outside New York. In addition, the company neither leases or owns any real or tangible property outside New York.

The Company sells its inventory to small computer repair companies throughout the United States. It employs 12 salespersons within Latka, all of whom work from their own home and drive cars that are owned by Comp-u-Big. These salesmen visit customer stores and cannot approve customer orders. Based the prior year accounting records, the Company secured about $2,400,000 in sales to customers located in Latka in 2021. Al completed orders are delivered by the United States Postal Service.

[Write the rest of the memo utilizing this format:]

Issues: [Hintthere are several; I suggest you discuss them all]

Analysis:

Conclusions: