WEEK 2: TERM PAPER OVERVIEW (DUE WEEK 6)
Your term paper begins with a scenario provided below. You must examine the facts stipulated in
the scenario, define various entity types, and make a recommendation regarding entity selection.
You will provide responses to various tax implications [that may differ] based on your entity
selection. You will be graded on a clear, concise, but comprehensive paper that shows the
instructor that you can interpret tax law, apply it to a real-world scenario, and communicate it in an
organized and well-thought-out manner.
The due date for the paper will be the end of Week 6.
After 20+ years of working for other firms, three professionals are considering combining forces
and establishing their own practice. The three professionals are Penelope (enrolled agent, age
41), Mark (CPA, age 43), and John (CVA, age 65). Penelope specializes in taxes, Mark is an
auditor, and John is a business valuation expert.
There are various options available regarding entity selection for the new business venture. The
appropriate business entity for any individual(s) will depend on their particular facts and
You are a valued colleague and friend of this trio, and they have come to you seeking advice as
to how to structure their new business. Please consider the following tax and nontax issues as
you recommend an entity choice to Penelope, Mark and John.
I. Research and describe the main characteristics of the various forms of organization (i.e.,
entity) that are available to Penelope, Mark, and John.
II. Become familiar with the tax implications of choosing one form of organization over
III. Make your recommendation as to what form of organization (choosing only one) you
believe will be most beneficial for the group from a tax standpoint. Be sure to explain the
reasoning for your choice. Once your choice is made, discuss the various tax implications
6/5/2018 Week 2: Term Paper Overview (Due Week 6): Federal Taxes and Management Decisions
to the entity and to the three individuals, as follow.
IV. Discuss the tax consequences of contributing cash, property, and/or services to the new
entity (discuss only for the entity you have recommended).
V. Discuss, in detail, how this entity is taxed (if at all) and what filing requirements it has with
the IRS (discuss only for the entity you have recommended).
VI. Discuss how income and distributions may or will be allocated to Penelope, Mark, and
John (discuss only for the entity you have recommended).
VII. Discuss, in detail, how the individuals are taxed (if at all) with respect to the net profits from
this entity and what filing requirements they will each have with the IRS (discuss only for
the entity you have recommended).
VIII. Discuss how Penelope, Mark and John will calculate their “basis” in the new entity. Be sure
to include the impact that debt has on basis, if any (discuss only for the entity you have
IX. Regarding limited liability, discuss the exposure that Penelope, Mark, and John’s personal
assets will have to the debts and lawsuits of the entity you have recommended (discuss
only for the entity you have recommended).
X. Conclude why entity selection is important to a newly forming business.
Your paper is worth 250 points and will be graded by the following criteria.
Various Forms of Organizations Available 5
Recommendation and Reasoning 25
Tax Consequences of Contributions 10
Taxation and Filing Requirements of Entity 10
Allocation of Income and Distributions 10
Taxation and Filing Requirements of
Basis Calculation 10
Limited Liability 10
Importance of Entity Selection 10