Willy Wonka-Tax Affairs Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Willy Wonka-Tax Affairs Case Study Solution

Willy Wonka case revolves around tax evasion. As a special agent attached with the IRS, I would like to have a number ofkey information in an order relating to this case.

Required information:

As a special agent of the Internal Revenue Service (IRS), I would like to gather the following information through the grand jury to investigate Willy Wonka’s tax affairs.

First of all, I will gather the information about the nature of the operations of both companies S-corp Golden Ticket Enterprises and Oompa Loompa Marketing. The rationale behind this information is that it will reveal the possible sources from where these both companies can earn income and incur expenses hence this will help in assessing net income which is declared as the taxable income.

The main problem in the case is that Willy Wonka hides its control over the foreign bank account in Never Land Bank. Willy Wonka uses this account to deposit Oompa Loompa Marketing money which is received from the S-corp Golden Ticket Enterprises. To investigate the control over the banks I will obtain the list of banks from both companies along with this, I will also obtain cash balances and a bank statement from both companies then reconcile their balances. The rationale behind this investigation is that it will reveal the Willy Wonka controls over the banks and it will also reveal the bank balance which should be taxed.

Along with this information, I will also obtain tax returns for both companies to ascertain which amount is reported as the taxable income.

Appropriate Witness for the interview:

Individuals to witness will include the CEO, accounts manager and accountant of Willy’s company along with the branch manager of Never Land Bank will also be considered to obtain the information about the bank accounts.

To obtain the information about the operations of the company I will interview the CEO and managers of the company because CEO better knows the objectives and goals of the company, therefore, information obtained from them will be vital in understanding the operations of the company.The rationale behind obtaining information from the managers is that we can compare two sources of information to enhance its validity.

To obtain information about control over the banks and bank balances, I will interview the personnel who is responsible for the bank transactions and I will also obtain information from the bank managers. From this information, I can conclude that on which account the company has control and how much amount company has in its bank account.

Along with this, I will also interview the accountant of Willy’s companies to obtain information about tax information and to ascertain the tax return amount.

Willy Wonka-Tax Affairs Harvard Case Solution & Analysis

Answer #2

Following the information gathered as the Special Agent, a number of charges will be recommended to the prosecutor. These charges include:

Defeating the tax or attempting to evade:

According to Section 7201 of United States Code’ Title 26, anyone who efforts to avoid or defeat any imposed tax deliberately will be considered as guilty and therefore will be fined up to $100000 ($500000 in the case of the corporation) or will be imprisoned till 5 years or both. However, under this charge, the prosecutor must prove a tax overdue, an act that leads to evade tax and that Willy acted willingly.

Pros:

This charge will require the defendant in the case to pay the required amount of the tax that he or she did not pay.

The penalty will threaten the defendant from doing this act again in the future.

Cons:

The cons of this charge are that it is difficult to prove that Willy acted willingly.

The other most common difficulty is the ability to prove if Willy acted willingly in committing the charges.

Failure in collecting and paying taxes willfully:

According to Section 7202 of United States Code’Title 26,anyone who is responsible to account for, collect and pay the tax levied by this title becomes deliberately fail to assemble or frankly account for and pay such tax will be considered as guilty and therefore will be fined or imprisoned up to 5 years or both. However, here the prosecution must prove that Willy had a duty to pay tax, that he failed to collect the tax and he acted willingly.

Pros:

This charges will require the defendant in the case to pay the required amount of the tax that he or she did not pay.

The charge will also recognize the accounting period for which the defendant failed to pay his or her tax. Hence more discrepancies can be analyzed during that particular period...............

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