In this milestone, you must first compute the property disposition capital gain and taxation of gross incomefor the client described in the final project data sheet.
Then, in a memorandum you write to the client, explain the tax consequences ofthe possible sale or exchange of the land.
Base your explanation on your computations and relevant sections of the Internal Revenue code, including the impact on cash flow and salary or cash distributions.
Specifically,the following critical elements must be addressed:
A.Compute the property disposition capital gains and taxation of gross income.
B. Identify the tax consequences on the sale or exchange of the land consistent with capital gain rules.
Consider the selling expense, broker’s fees, closing costs, appraisals, and surveys and the correct schedule form to complete.
C. Describe the after-tax effects on the client’s cash flow based on the sale of the land. Reference appropriate capital gains tax rules.
D.Explain whether or not the client and his child should take a salary or cash distribution according to tax purposes and Internal Revenue Code and Treasury regulations.
Consider the type of business and the tax effect whether it is salary, dividends,or cash withdrawal