A MEMORANDUM To: From: Re: Date: BRIEF ANSWER The introductory sentence or paragraph should identify the client, and indicate what the client wants. Concisely state your conclusions to the issues...

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A MEMORANDUM To: From: Re: Date: BRIEF ANSWER The introductory sentence or paragraph should identify the client, and indicate what the client wants. Concisely state your conclusions to the issues raised by your client and briefly state your overall rationale. STATEMENT OF FACTS The body of the statement of facts should describe the legally significant and key background facts in an objective, generally chronological or topical manner. ISSUE/S The question generally takes the form: Does/Whether this tax law provision apply to these legally significant facts? DISCUSSION A. Thesis Paragraph: Begin the discussion section with a thesis paragraph that introduces the reader to requirements of achieving your client’s stated objectives. Also, need to state your prediction relating to your client’s desired objective in the order discussed in the balance of your discussion section. B. Identify first requirement for achieving your client’s objective: 1) Topic sentence 2) Fully define and synthesize the rule for the first requirement for achieving your client’s objective 3) Apply the facts to the stated rule (consider analogizing/distinguishing case precedent) 4) Articulate any counter argument (consider analogizing/distinguishing case precedent) 5) Conclude with respect to the first requirement C. Repeat the process described in item B for the remaining requirements necessary to achieve your client’s objective If there are more than one issue, make sure to use sub-heading to address each issue. Each sub-heading must be presented in the same order presented in the thesis paragraph. End with a goodwill closing to maintain professional relationship. Accounting 620 On December 1, 2017, the Joel Freedman, owner of Advanced Technologies was approached by Environmental Solutions, Inc., and offered to buy his company. After consulting with his attorney and further negotiation with management of Environmental Solutions, Mr. Freedman decided to go through with the transaction on August 1, 2018. On August 15, 2018, a letter of intent was signed by Mr. Freedman’s attorney on his behalf, and the law firm representing Environmental Solutions, documenting the parties’ intention that Advanced Technologies would transfer all of its assets and liabilities to Environmental Solutions for the sum of $ 5 million. The letter of intent was presented to the Board of Directors of Environmental Solutions, Inc. on September 30, 2018, and on that day the Board approved the final terms of the transaction and a proposed final contract prepared by the company’s counsel. This transaction was consummated and closed on October 15, 2018. You have been asked to assist in meeting the tax compliance requirements with respect to the transaction, and to provide tax advice as to the consequences of the transaction to both the seller, Advanced Technologies, and the buyer, Environmental Solutions. Advanced Technologies was founded in 2009, by Joel Freedman and has always operated as a sole proprietorship. Prior to starting this company, Mr. Freedman worked full time as an environmental engineer for a large company. While employed, he pursued scientific experimentation in the field of environmental and hazardous waste removal technology on his own time. His research led to discovery of a new technique that could result in a more efficient and effective removal of hazardous waste. He promptly patented this technology and decided to start his own company so he could put his new technology to use. Therefore, he resigned from his position as an environmental engineer and founded Advanced Technologies. Data from the records of Advanced Technologies was presented reflecting the following on date of the transaction: Total Assets Liabilities: Accounts Payable Accrued Payroll Long-term Debt Total Liabilities Equity Contingent Environmental Claim Advanced Technologies Schedule of Assets and Liabilities Book Value Fair Market Tax Basis Value * Assets Cash 100,000 100,000 100,000 Accounts Receivable 250,000 250,000 250,000 Allowance for Bad Debts (10,000) - (10,000) Inventory 125,000 125,000 100,000 Equipment 150,000 150,000 110,000 Depreciation Allowance- Equipment (50,000) (60,000) Building 250,000 100,000 500,000 Depreciation Allowance- Building** (20,000) (10,000) Intangible Assets (Patent) *** 220,000 25,000 1,000,000 1,015,000 680,000 2,050,000 Book Value Tax Basis Fair Market Value 90,000 90,000 90,000 10,000 10,000 10,000 200,000 200,000 200,000 300,000 300,000 300,000 715,000 380,000 1,750,000 Liability (footnote disclosure)**** 2,000,000 *The fair market values were determined by appraisals and valuations performed by Advanced Technologies, and validated by Environmental Solutions, Inc. in its due diligence process. Both parties agree as to the valuation of the assets, including any impairment or decline in realizable value thereof, as reflected in the “Fair Market Value” column of this schedule. The valuation allowance on accounts receivable was reviewed in the due diligence period and was determined to reflect a
Answered Same DayDec 05, 2021

Answer To: A MEMORANDUM To: From: Re: Date: BRIEF ANSWER The introductory sentence or paragraph should identify...

Preeta answered on Dec 09 2021
127 Votes
MEMORANDUM
To: Advanced Technologies, Environmental Solutions, Inc.    
From: Tax Consultant
Re: Tax Advice
Date: 7th December, 2019
BRIEF ANSWER
In this case, acquisition of Advanced Technologies by Environmental Solutions Inc., a total of six tax related issues could be fo
und and in this memo advice has been given on how to handle those tax related issues. US taxation law section 1060 has been used to solve the issues.
1. The first issue is that if tax will apply on expenditure cost incurred by both the companies during the time of acquisition. Expenditure costs will be considered a part of the acquisition cost of both the companies and so the expenditure cost is to be capitalized with the acquisition cost. Then as the amount will be capitalized each year, such treatment is to be made.
2. The next issue is that if tax is to be paid on the contingent liability that was present in the balance sheet of Advanced Technologies based on a pending lawsuit. The contingent liability will be treated as a part of the liability and so will be accounted for in tax calculation.
3. Building is old and has been reconstructed on several occasions. MACRS depreciation has been allowed on that. It will be treated as an asset during the transfer of asset. So, tax calculation will be made on this item.
4. The patent is having three different values but ultimately the value for tax basis will be used for tax calculation.
5. An allowance for bad debt is made in the original books as well as for fair value but has not been accounted for in tax basis. But that amount has to be taken into account while calculating tax.
6. Ultimately Environmental Solutions Inc. paid $1 million for the settlement of the lawsuit. The company can include this amount for the tax calculation.
STATEMENT OF FACTS
On December, 2017, Environmental Solutions Inc. sent a proposal to Joel Freedman, who is the owner of Advanced Technologies to buy his business. In august, 2018, both the parties showed their intent to go through the deal and finalized to exchange all the assets and liabilities in exchange of $5 million. In October, 2018, finally the deal was finalized.
Originally, the company Advanced Technologies was founded by Joel Freedman as a sole proprietor. Previously he worked in a big company as an environmental engineer where he discovered a new technique of hazardous waste removal. So, he patented the technology and started his own business.
The purpose of this memo is to find the tax solutions for the different transactions that both the companies undertake during their time of acquisition as well as other transactions. Generally the mergers are taxable and both the parties involved in the process of merger need to pay taxes on the capital and assets being...
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