Posted: March 19th, 2015

MS Students will find the Goss Corporation research assignment in the textbook at C:74, page 263. Assume Goss is your firm's tax clien

MS Students will find the Goss Corporation research assignment in the textbook at C:74, page 263.  Assume Goss is your firm’s tax client.

MS Students will find the Goss Corporation research assignment in the textbook at C:74, page 263.  Assume Goss is your firm’s tax client.

Required: Prepare your answers in no more than two typed pages.  Double-spaced.  Minimum font 11.  Your papers are due to me in class on March 26, 2015.  Do not post them to BB.

Make sure to consult “Statements on Standards for Tax Services No. 6” in the Appendix pages 538-539 for part b of the assignment.

Watch sentence structure/syntax/subject-verb conformity/spelling.  No more than 25 words in a sentence.  Use active voice. Avoid passive voice.

It is unnecessary to use the Memorandum format for your research.  Good luck.  This assignment is worth 75 quality points.

Goss Corporation is a leading manufacturer of hangers for the laundry and dry cleaning
industry. The family-owned business has prospered for many years and has generated
approximately $100 million of sales and $8 million in after-tax profits. Your accounting
firm has performed the audit and tax work for Goss and its executives since the company
was created many years ago. The advent of plastic hangers and improved fabrics has kept
the company’s market share constant, and the corporation plans no major plant expansions
or additions. Salaries paid to corporate executives, most of whom are family members, are
above the national averages for similar officers. Dividend payments in recent years have not
exceeded 10% of the after-tax profits. On December 1 of the current year, you were
assigned to oversee the preparation of the current year Goss tax return. In undertaking the
assignment, you review Goss tax returns for the past three years. You note from Schedule L
(the balance sheet) that, during this period, the corporation made about $1.5 million in
loans to three executives and regularly increased the size of its stock portfolio. This increase
leads you to believe that Goss may be liable for the accumulated earnings tax in the current
year and prior years.
Required:
a. What responsibility do you have to make Goss or the partner in charge of the Goss
account aware of the potential accumulated earnings tax liability?
b. Should you advise the IRS of the potential liability for prior years? Should you disclose
the potential liability on the current year return?
c. Prepare a list of measures that can be taken to reduce or eliminate Goss’ liability for the
accumulated earnings tax.

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