The process of distributing the lump sum purchase price between the land and the building is a critical point in the real estate registration. It is important to note that according to the law, land, and buildings are specified in one agreement when the transfer of ownership ensues when the investment is made. This is described as a one-time agreement, which is why allocating the portions correctly at once is essential because depreciation is based on value (Schmid 61). When controller Don Nelson suggests that business owner Judith Prince change parts of the land and building into transactions that do not correspond to reality, this is one type of fraud. For the controller, the value of this scam is to increase the company’s net income (Schmid 61). Probably the controller would like to have bonuses dependent on corporate profits. The financial director has concerns that such a distribution would bring additional losses to the company. Accordingly, the parties involved have different values; the corporate representative wants to avoid future difficulties with increased taxes (Schmid 64). On the other hand, the counterparty would like to receive a short-term benefit.
Alternatively, the financial director can insist that the shares be distributed in accordance with the law. In this way, the corporation will initially spend more funds on depreciation but will not be a party to the scam (Schmid 65). Accordingly, the value of this option is that the corporation’s representation and the controller will retain their own reputation. Otherwise, outside auditors will find it unethical and require an audit adjustment (Schmid 63). Thus, it is essential to register the agreement immediately in accordance with the provisions of the law in order to avoid reputational and financial costs. Hence, Grandma’s Cookie Company representation needed to reject the Comptroller’s suggestions.
Work Cited
Schmid, Allan. Land Ownership and Taxation in American Agriculture. Routledge, 2019.