Review the Final Project. Choose the portfolio project that you will complete for this course. In a one-page memo to the client Venezia Partnership, summarize the significant tax issues faced during the current year. Then discuss at least three sources that you will use to address the tax issues. Provide a citation for the source, a brief summary of the source, and how you think it will be helpful for addressing the tax issues for your client.
Project Description
Partnership Taxation
This project covers general partnership basis issues including computation of partners’ adjusted basis, determination of current-year tax position, preparation of tax forms, and creation of a memo to the partners with an analysis of their current-year tax issues and changes to basis.
In the current year, Mary, Andrew, and Paul formed Venezia General Partnership. Mary contributed $55,000 cash, Andrew contributed $55,000, and Paul contributed land with a cash basis of $70,000 and a fair market value of $180,000. The partnership assumed a $70,000 mortgage on the land; no partner is personally liable for the mortgage. At the end of the current year, Venezia made a $7,000 payment on the mortgage. Mary, Andrew, and Paul will split all profits and losses equally.
Current-year operations had the following results:
- Sales revenue: $260,000
- Cost of goods sold: $205,000
- Operating expenses: $35,000
- Long-term capital gains: $1,200
- Section 1231 Gains: $450
- Charitable contributions: $350
- Municipal bond interest: $150
- Salary paid as a guaranteed payment to Andrew (not included in expense): $1,500
Part A: Determine Basis
- Using Thomson Reuters, find a court case discussing partners’ basis in the partnership interest. Summarize the court case and tax law relating to basis calculations.
- Using the information summarized, determine Mary’s, Andrew’s, and Paul’s initial basis in the partnership interest and the basis for each partner at the end of the current year. These calculations should be 1 page.
Part A Submission Requirements:
- Your summary of the court case, summary of tax law relating to basis calculations, and the specified partners’ basis calculations should be 3-5 pages not including the required cover and reference pages. Note, the basis calculations should not be more than 1 page.
- Support your paper with at least 4-6 scholarly, legislative, or court references (of which the textbook may be one).
Part B: Tax Form Preparation
- Prepare Schedule K for the current year from page 4 of Form 1065.
- Prepare Andrew’s Schedule K-1.
Part B Submission Requirements:
- The tax forms required for Part B should be submitted as PDF documents.
Part C: Client Letter
Prepare a letter to Andrew summarizing her current year tax issues.
Part C Submission Requirements:
- Your letter should be 2-3 pages not including the required cover and reference pages.
- Support your paper with at least 4-6 scholarly, legislative, or court references (of which the textbook may be one).
Chapters 27 & 28 in South-Western Federal Taxation 201
Imposition of Tax, 26 U.S. Code § 641
Imposition of Tax, 26 U.S. Code § 2501
McCormick, P. (2017). Key estate planning concepts for international clients. Estate Planning, 44(6), 18-21.
Saylor, T. (2017, April). How to avoid inheritance mistakes. Journal of Accountancy. Retrieved from https://www.journalofaccountancy.com/newsletters/2017/apr/avoid-inheritance-mistakes.html
IRS.gov. (2018a). Definition of a trust. Internal Revenue Service. Retrieved from https://www.irs.gov/charities-non-profits/definition-of-a-trust
IRS.gov. (2018b). Estate tax. Internal Revenue Service. Retrieved from https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax
Tax Cuts and Jobs Act of 2017, Pub. L. 115-97. (2017). Retrieved from https://www.congress.gov/115/bills/hr1/BILLS-115hr1enr.pdf
Vanguard. (2018, February 26). Tax and estate planning in a changing environment: The new rules’ effect on estate and gift taxes. [Video file]. Retrieved from: https://youtu.be/3gL1TyD0xJ4
