Determining Tax Implications of Organizational Structure

A Two-Part Decision-Based Case Assignment

Abstract

A two-part applied tax case is presented. In the first part, students are introduced to The Gourmet Rancher, a newly formed farm-to-table style restaurant owned by three friends. Students are asked to complete forms 1065 (including schedule K, L, M-1 and M-2) and K-1s for the three partners. The first part is a straightforward application of partnership tax concepts including partnership income and deductions, allocation of separately listed items, reconciliation of partner capital accounts. The second part is an analysis of organizational structure options under two different performance scenarios, which requires critical thinking and decision making under uncertainty. The first part of this case is appropriate for any level tax course and facilitates the assessment of student understanding and application of several partnership tax concepts. The second part of this case is appropriate for an advanced undergraduate or a graduate level tax course and provides an opportunity for instructors to evaluate the critical thinking and decision-making efforts of students, based on multiple possible performance scenarios.