Taxes and organizational form: An activity in partnership and corporate entities

This instructional resource presents an integrative approach to understanding tax liability and organizational form in the areas of partnership and corporation formation within a dynamic tax environment. The case demonstrates that the type of entity is very influential in the determination of the tax liability at the entity and owner level. Further, this case enhances critical-thinking skills by allowing students to develop and apply their knowledge of: book and tax financial accounting; the tax basis calculations of the ownership interests; and the computation of tax liabilities for each organizational form. The integrative nature of this case is something that is typically not addressed in textbooks or tax courses as it spans both entity and owner levels of analysis. This challenges students to evaluate and compare taxation at the various levels and then synthesize their results for understanding the business relevance. The challenging, integrative nature of the case is representative of the business decisions taxpayers make and helps foster a better understanding of the impact taxes have on business decisions, while creating a robust educational environment for the students.