Assume that you are a CPA and a tax specialist. Your clients include Ale and Grains, Inc., an S corporation, and Gustav and Heidi Lager, a married couple who are shareholders and the operators of Ale and Grains. The S corporation has expanded to include 100 qualified shareholders this year. Gustav and Heidi have told you that they have just obtained a divorce. Both individuals will continue to operate Ale and Grains for the ownership group, and neither party plans to dispose of her or his ownership interest. They know that certain rules govern the number of shareholders allowed in an S corporation, but they tell you not to be concerned because only their mailing addresses will change. They refer to the doctrine of substance over form and how it fits this situation. Write a letter to Gustav, Heidi, and the other shareholders offering your advice. Refer to the AICPA Code of Professional Conduct and the Statements on Standards for Tax Services (which can be found at www.cengagebrain.com) where necessary.
DQ 2: Waldo Corporation has recently retained your accounting firm to prepare its income tax return. Art, the partner in charge of the engagement, has assigned you the job of reviewing last year’s return and making recommendations on the preparation of this year’s return. The only item of concern on the return is a $32,000 dividends received deduction that Waldo claimed on $40,000 in dividends it received from a Swiss corporation in which it owns a 30% interest. Write a memorandum to Art with your recommendation on the course of action your firm should take regarding the dividends received deduction.
These are just discussion questions so APA format does not need need to be used. Please provide a different response than what is posted on Solution Inn. The responses can be put on the added Word Document. References still need to be listed.
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