Tax Implications

Description- Tax Implications

I have attached the sample company ( Mason Machining) data file with their financial numbers. Sample Company Scenario JIM uses a hybrid accounting method. Therefore which in this case includes accrual for gross profit and cost of goods sold and cash for all other income and expenses. JIM’s strategy is to grow the company through internal growth and acquisitions. Consequently, JIM is looking at a vertical integration strategy that would lower the cost of currently purchased component parts. Mason Machining, Inc. is currently a supplier to JIM. It is a U.S. subchapter S corporation that manufactures component parts used in industrial machinery. Mason Machining, Inc. is a closely hold family S corporation.  Also JIM is offering the family $750,000 plus $800,000 in common stock to acquire all the assets of Mason.

Additionally you are a member of JIM’s acquisition team assigned to review the tax implications of the acquisition. Then click below to view Mason’s acquisition data that has been put together based on Mason’s 2007 and 2008 actual performance. Part 1 – 600 Word Memo JIM realizes the importance of being a good corporate citizen and makes generous contributions to worldwide charitable organizations. For the current year, JIM wants to contribute $1,500,000 to various charities. Based on prior year’s tax laws, if JIM’s taxable income before charitable contributions is $11,500,000 in the current year.

In summary

Calculate the charitable contribution allowance for the current year. Provide a recommendation to JIM management regarding the tax implications of this contribution. Part 2 – 1500 Essay JIM currently uses the calendar year as its financial and tax annual accounting period. Management, because of the seasonality of sales, wants to change to a fiscal year beginning April 1st through March 31st. You have been asked to review the tax law criteria for making this change. Write a memo to your CFO: indicating the outcome of such a change on current taxes, and outlining the requirements for making this change.

Attached Files

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