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TAX 665 Final Project Part II Guidelines and Rubric

Overview The second final project for this course is the creation of a PowerPoint presentation. Everyday economic events can have significant estate and gift tax consequences. Being able to spot estate and gift tax issues and communicate effectively with clients is essential for any high-level financial professional working in a privately held enterprise or advising high-net-worth individuals. Professional accountant working in a bank, consulting firm, or financial services firm are often responsible for advising clients on tax implications of their financial investment decisions, including estate and gift taxation as it is currently applied in the United States and around the world. In this project, you will model the role of an associate in a boutique tax consulting firm that specializes in the real estate industry. You will demonstrate your ability to advise clients on estate and gift taxation, life insurance, annuity, and charitable giving strategies, and make ethically sound and socially responsible decisions by creating a PowerPoint presentation for your client. In this assignment you will demonstrate your mastery of the following course outcomes:

 Assess the potential gift or estate tax liability in relation to the annual exclusion, gift tax deductions, marital deduction, and unified credit, as provided for by the Internal Revenue Code, while meeting the client’s desired economic outcomes

 Analyze various forms of property for potential estate and gift tax consequences of these forms of ownership, as provided for by the Internal Revenue Code, Treasury Regulations, and case law, and their impact on the client’s economic outcomes

 Evaluate the risk of noncompliance with AICPA, IRS Circular 230, and the penalty provisions of the Internal Revenue Code in light of possible stakeholder misconduct, using moral reasoning to advise the client

 Recommend strategies that reflect versatility of thought, for achieving favorable estate and gift tax consequences of wealth transfers, by reducing tax liability in order to meet the client’s desired economic outcomes

 Evaluate the influence of an estate and gift tax planning strategy on the effectiveness of the overall tax strategy, including income tax, and its potential to result in ethically sound outcomes and optimum desired results for the client

Prompt You are an associate in a boutique tax consulting firm that specializes in the real estate industry. You have been assigned to work with a client who needs advice on the tax implications of his business holdings, which include Skyscrapers, a commercial real estate firm organized as a sole proprietorship with a fair market value of $1 billion. He is considering transferring partial ownership of the Skyscrapers to both of his children and selling a 10% interest to an unrelated third party. You have already prepared a memorandum informing management of the estate and gift tax consequences of these potential transactions and including a cost- benefit analysis. Now, you need to prepare a PowerPoint presentation that communicates your tax planning strategy, which you will present to the client and his financial advisors. Specifically, the following critical elements must be addressed:

I. Introduction A. Describe the estate and gift tax strategy to the client in layman’s terms. Concentrate on the creative aspects of the strategy that minimize the

client’s tax liability over time. B. Explain how family limited partnerships (FLPs) and intentionally defective grantor trusts (IDGTs) help to accomplish the client’s desired economic

results. Consider the jargon and mechanics of the transaction when preparing the presentation. C. Justify how your strategy will minimize income tax liability on the sale of the partial interest in the business to an unrelated third party and on the

taxable income potentially received by the business’s operations over the next 24 months. Consider including comparisons to alternative transaction structures in the justification.

II. Tax Planning Strategy

A. Recommend life insurance, annuities, and charitable giving strategies to the client, taking into account anticipated business needs and cash flow. B. Summarize, using layman’s terms, how the taxpayer’s overall cash flow and liquidity concerns were taken into account when designing the

proposed strategy. Consider current gift tax expenditures. C. Explain the 30-year projections in layman’s terms, assuming 3% annual appreciation in the value of the assets of the business, using the proposed

estate tax strategy. Consider the gift and estate tax liability the client will ultimately pay. D. Formulate the potential lifetime estate tax savings and tax liabilities over 30 years under the proposed strategy and without the proposed

strategy. Consider IRS Code and Regulations. E. Analyze long-term income tax considerations by comparing the total income tax liability with no tax strategy against the liability applying your

proposed estate tax planning strategy.

III. Risk Analysis: Analyze penalties, interest, and ethical considerations that might impact the client using the following scenarios. Keep layman’s terms in mind as you word the results of your analysis supported by appropriate IRS Code and Regulations.

A. The client did not have enough cash on hand to fund gift tax or income tax incurred from the estate planning. B. The client encouraged his friend to prepare an inaccurate appraisal.

Final Project Part II Rubric

Guidelines for Submission: PowerPoint presentation including the speaker notes feature for additional appropriate information.

Critical Elements Exemplary (100%) Proficient (90%) Needs Improvement (70%) Not Evident (0%) Value

Introduction: Describe

Meets “Proficient” criteria and details creatively minimize the client’s tax liability over time

Describes an estate and gift tax strategy that is effective over time using layman’s terms

Describes an estate and gift tax strategy, but details either do not show how the strategy is effective over time or are not in layman’s terms

Does not describe an estate and gift tax strategy

9

Introduction: Explain

Meets “Proficient” criteria and details provide exceptional ability to clarify the jargon and mechanics of the transaction

Explains how FLPs and IDGTs help to accomplish the client’s desired economic outcomes

Explains how FLPs and IDGTs help to accomplish the client’s desired economic outcome, but details are unclear or cursory

Does not explain how FLPs and IDGTs help to accomplish the client’s desired economic outcomes

9

Introduction: Justify

Meets “Proficient” criteria and illustrates the effectiveness of the proposed income tax strategy in comparison to alternative transaction structures

Justifies how the proposed strategy will minimize income tax liability over the next 24 months based on relevant income tax consequences

Justifies how the proposed strategy will minimize income tax liability, but details lack relevance

Does not justify how the proposed strategy will minimize income tax liability

9

Strategy: Recommend

Meets “Proficient” criteria and strategies show creative approaches that address the client’s anticipated financial needs

Recommends strategies involving life insurance, annuities, and charitable giving that comprehensively address the client’s anticipated financial needs

Recommends strategies that address the client’s anticipated financial needs, but details are cursory

Does not recommend strategies that address the client’s anticipated financial needs

9

Strategy: Summarize

Meets “Proficient” criteria and details accurately and comprehensively show how the proposed strategy maximizes future estate tax strategy while being efficient with current gift tax expenditures

Summarizes, using layman’s terms, how the client’s overall cash flow and liquidity concerns were taken into account when designing the proposed strategy

Summarizes how the overall cash flow and liquidity concerns were taken into account when designing the proposed strategy, but details are either unclear or cursory

Does not summarize how the overall cash flow and liquidity concerns were taken into account when designing the proposed strategy

9

Strategy: Explain

Meets “Proficient” criteria and includes the 30-year projected gift and state tax liability the client will pay

Explains in layman’s terms the 30-year projections, assuming the 3% annual appreciation, using the proposed strategy

Explains in layman’s terms the 30-year projections, assuming the 3% annual appreciation, but details are either unclear or cursory

Does not explain the 30-year projections

9

Strategy: Formulate

Meets “Proficient” criteria and details are comprehensive and accurately cite IRS Code and Regulations

Formulates potential lifetime estate tax savings under proposed strategy and compares both tax liabilities assuming no strategy was used versus applying the proposed strategy

Formulates potential lifetime estate tax savings under proposed strategy, but details either do not compare both tax liabilities with and without the strategy or are cursory

Does not formulate potential lifetime tax savings

9

Strategy: Analyze

Meets “Proficient” criteria and details justify how the proposed strategy addresses income tax in comparison to no estate and gift strategy being pursued

Analyzes long-term income tax considerations by comparing the total income tax liability with no tax strategy versus the liability applying the proposed strategy

Analyzes long-term income tax considerations, but details either do not compare the total income tax liability with and without the proposed strategy or are cursory

Does not analyze long-term tax considerations

9

Risk Analysis

Meets “Proficient” criteria and details accurately and clearly communicate results that are supported by appropriate IRS Code and Regulations

Analyzes potential penalty, interest, and ethical considerations, addressed in both scenarios, that might impact the client

Analyzes potential penalty, interest, and ethical considerations that might impact the client, but details are inaccurate or incomplete

Does not analyze potential penalty, interest, and ethical considerations addressed in both scenarios

18

Articulation of Response

Submission is free of errors related to citations, grammar, spelling, syntax, and organization and is presented in a professional and easy-to-read format

Submission has no major errors related to citations, grammar, spelling, syntax, or organization

Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas

Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas

10

Total 100%

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