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Federal Taxation Assignment

Tax Research Assignment #3

Using the information from Chapter 7 and the tax research resources from Chapter 5 write a tax research memo for the firm’s records (TAX FILE MEMORANDUM). No client memo is necessary. Refer to pages 5-15 through 5-16 for a sample memo format. Use Checkpoint to find your primary sources and only cite primary sources. Some Internal Revenue Code (IRC) sections to consider include, but not limited to, the following: 162(a); 263(a); 1016(a)(2); 1012; 168; 168(k); 230F(a); 179(d)(1); 179(b)(2); 179(b)(3), etc. Federal Taxation Assignment Help

When writing this research memo, you may have a number of research issues. Use the numbered items to develop your tax issues. List them separately (bullet points or numbered). Some of the bullet items are not research issues but information that should be incorporate and answered in your analysis. The law and analysis section should address each research issues in a separate paragraphs. Please do not embed your research into this document! Federal Taxation Assignment Help

Chocolat, is a newly formed chocolate manufacturing company in Massachusetts. During the current year, the company acquired and placed several assets in service. The new facility design includes areas for candy making classes. A list of the year’s acquisition is outlined below.

Other: The company has taxable income for the year of $500,000. 

Current Year ExpendituresDate Placed in ServiceAmount
Building (building $950k; land $2500k)April 1$1,200,000
Manufacturing equipment for melting, mixing, and tempering chocolateJune 5    1,900,000
Build-out of interior area for show room and candy making lessons Federal Taxation Assignment HelpOctober 10250,000
Displays, molds, and fixtures for candy-making lessonsNovember 2455,000
Office furnitureDecember 160,000
Delivery van (6,000 lbs.)December 1545,000
Total Cost 3,910,000

Required:

Research the following to assist the company in maximizing tax savings for the year using the various allowed cost recovery methods. You will be required to (1) submit a research memo document and (2) an Excel template (provided) to calculate depreciation and support your analysis. Your analysis and your computations must be consistent between the written document and the Excel spreadsheet calculations. Federal Taxation Assignment Help

When drafting your memo your analysis should address the following:

  1. Provide a concise but comprehensive overview of the concept of cost recovery.  (5 points)
  • Determine from a tax perspective, if the costs above are deductible expenses or capitalized costs. Define what constitutes an acquisition to be capitalization. Explain. (5 points)
  • Compute the corporation’s MACRS deprecation with respect to the assets placed in service this year.  Assume that the Company does not elect to use Section 179 or bonus depreciation. Use the provided Excel template and detail each acquisition with the required information. Refer to Revenue Procedure 87-56 for information on asset class information. (15 points)
  • The corporation decided to purchase $300,000 of additional specialty candy-making equipment in December. The corporation could buy the equipment in December or postpone until January of the new year. What effect would this decision have on the depreciation calculation with regard to the assets already placed in service. Be specific. (10 points) Federal Taxation Assignment Help
  • What is Sec 179 Expensing election? How much and what assets are eligible? Are any of the asset not eligible? If so, explain.  Does the company face either, or both of the two limitations? Be specific in your explanation. (15 points)
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  • What is bonus depreciation? How much and what assets are eligible? Are any of the asset not eligible? If so, explain.  Does the company face any limitations? Be specific in your explanation. (10 points)
  • Assume that the corporation will maximize its cost recovery deductions. Using the Excel template, calculate the amount of MACRS depreciation, Section 179 and bonus depreciation. (15 points)
  • Explain the order of application and the overall strategy an organization would use to determine the method and amounts used for each. (5 points)
  • Use appropriate format, technical language, the written analysis should reflect your own word with appropriate references. However, only cite primary sources (law) in the body of the memo. Your written analysis should be consistent with the Excel calculated amounts. (15 points) Federal Taxation Assignment Help
  1. Write a reflection paragraph discussing what you learned from completing the assignment. Be specific. Also, what could be done to improve the assignment. Your reflection should be incorporated at the end of your written document after your conclusion.  (5 points)

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