07 National Case Student

7/31/2019 07 National Case Student

1/21

2007 Deloitte Tax Case Study Competition

National Case Study

The Tait family knows how to throw a party and how to make money in the process! Dave Tait isthe president and CEO (Chief Executive Officer) of Tait Family Fun, Inc. (Tait, Inc.). He has often

boasted: Just about every child in 20 states has ridden the Fire Mountain Express or been soaked inthe Niagara White Water Adventure. For almost 60 years, the Tait family has designed, developed,owned, operated, and syndicated theme parks around the country.

Dave Tait. Each day before he starts work, Dave mentally inventories his list of trophies. Tait,Inc. has completed development of 49 parks, and number 50 is on its way! The company has builtadventure parks in 10 states; Dave can view the Grand Texas Adventure Park from his 20 th flooroffice in the Tait headquarters building. The company has also developed Movieland in California,Island Paradise parks in both Hawaii and the U.S. Virgin Islands, and a host of other familydestinations in various locations.

Grand Texas is one of the original parks and it is still wildly popular. Somehow the Taits managed tocram hotels, shopping villages, restaurants, and the amusement park itself on just 400 acres, andthere is still a large parcel awaiting development on one edge of the park. Dave smiled in awe at thespecks-that-really-were-people lining up to experience the Free-Fall Tower on the other side ofthe park, directly across from his office. Im all about speed, but I cant believe theyll drop 20stories just for fun! he grinned.

One day in March 2007, Dave turned from the window to finish reviewing the OfferingMemorandum for the companys newest and most elaborate project yet Dreamland Park andResort, LLC (Dreamland, LLC) on about 4,500 acres in the rolling hills near San Diego, California.

But he found it difficult to focus. His mother, Martha, was in the hospital again. Daves wife, Patsy,mentioned almost daily that he spends too much time at the office. Daves two grown children wereannoyed that he never has time to visit them. Dave, himself, had just received a less-than-perfecthealth report from his doctor. Youre in good health for someone your age, the doctor had said.But who wants to feel 52?! thought Dave.

He moved to study the Dreamland model on the table in the center of the office. But his attentionshifted to the bookshelf in the corner where he spied a 1/18 scale model, red 1968 Mustang GTFastback he had built 40 years ago. For a moment, he was back in high school. He could almostsmell the rubber and see the smoke from his burnouts at the drag strip. He thought about theclassic cars in his 8-bay garage awaiting his refurbishing skills. And the bumper sticker Id ratherbe racing preserved in a shadow box, instead of defiling one of his precious cars. He couldnt helpit, he grinned again. Im ready to have my own kind of fun. Maybe its time to turn the reigns overto Jackie, he thought.

Jack Tait. Jack Tait is Daves younger cousin. He had started following Cousin Dave around theparks almost as soon as he could walk, and now Jackie (as he is known in the industry) is ChiefOperating Officer of the company.

Copyright 2007 Deloitte Development LLCAll Rights Reserved


2/21

2

Sometimes, looking at Jack, it is hard to believe he is serious about work. You can tell he spends alot of time in the gym and considerable time enjoying the sun! What may not be so apparent on thesurface is that Jack is a hard-core family man, and that he is dedicated to the Tait Family Fun

mission.

Jack has kept a lower profile at Tait, Inc. on purpose. He and his wife, Jennifer, have four teenagers,three sons and a daughter. When the children were younger, Jack attended as many ball games anddance recitals as one person could possibly sit through. Nowadays, he keeps repeating to himself, Icant believe Jeremy and Ashley will be heading to college this fall! His kids sometimes feel thewrath of his discipline, but they know they can call on him when they need him.

Jack believes deeply in providing a nurturing, caring environment for children, so he takes his jobseriously. I want to create a place where people of all ages can learn, grow, and be happy. With 25theme parks to his credit, Jack is the best in the business.

In March 2007, while Dave was in his office three floors away gazing at the Mustang model, Jacksighed, deep in thought. I know Dave is tired of working so hard. With my kids starting college,and Aunt Marthas health issues, its time for me to step up. Dreamland can be amazing, and Im thebest one to make that happen. Daves ready to have some fun maybe even start racing again, Jackgrinned, then he stared at the Dreamland blueprints with a look that said, Why didnt I think of thatbefore, and he penciled in a new design on the paper.

Martha Tait. When she was younger, Martha was a gorgeous woman. She had been a war bride,teaching second grade while her husband, Frank, served in the Philippines during World War II. Shelearned to survive with almost no resources and to take care of herself and her family without losingher Texas style, charm, and grace.

In March 2007, Martha was in the hospital for observation for the second time in a month. She hadjust celebrated her 75

thbirthday, and she kept promising, Ill still be here when Im 90. Dave

didnt know what to think. Even in the hospital, Marthas hair and makeup were always perfect, andshe always wore a smile. The doctors couldnt find anything specifically wrong except to say, Well,shes 75 years old and her body is tired. So Dave spends as much time with her as he can spare.

Martha seems to be responding to the attention. Lately shes been quite entertaining, managing toembarrass Dave with stories about his younger days. Well, there was that time you spun the car 360degrees, just after your dad and I showed up at the track. Patsy was there with some other guy, butyou were so cute about it that she dropped him and started trying to catch your attention. I guess itworked, she winked.



3/21

3

The Track. Once Jack finished his new design, he decided to talk to Dave immediately. He rolledup the blueprint, and marched upstairs to Daves office. Dave looked guilty when Jack walked in. Hehad been gazing, again, at his Mustang. With a trace of mischief in his voice, Jackie said, Hey,Dave, lets look at the Dreamland plans again.

Wistfully, Dave looked away from the Mustang and down at the plans Jack had brought with him.He stared for a minute at Jacks handwritten note on the side of the plan and then a huge smilecrossed his face. You are brilliant, cousin!

In Dreamland Park, a safe distance from the Phase II Sports Complex, Jack had penciled in a dragstrip, a racing track, and a stadium. Well add the same facilities at Grand Texas. And well start amuseum for your growing car collection. Ours will be the only parks in the country to have speedsports just a short tram ride from the roller coaster rides. Youll be able to race and rebuild your cars and still get some work done!



4/21

4

REQUIREMENTS

NOTE: Your analysis is as important as your final conclusion. Be sure to support each answer bydocumenting your thoughts, as well as showing your calculations. ALWAYS PROVIDECITATIONS.

NOTE: Several of the transactions described have been simplified from the way they would becompleted in the real world. This is to make your life easier, so just have fun!

Requirement 1. [Undergraduate oral presentation.] Refer to the March 17 letter to Phil Gardner.How is Marthas basis in her Tait Family Fun, Inc. stock determined? What is the effect on her basisof 1) the recapitalization 2) the new stock issuance and 3) the stock dividends? Does she recognizeincome, gain, loss, or deduction when she receives the stock or upon any of these other events?Calculate Marthas per-share basis separately for each stock lot as of March 17, 2007.

Requirement 2. [Undergraduate oral presentation.] Describe, in general, how a cash distribution

from a corporation (not in exchange for property) is treated. How does the result change if theshareholder surrenders stock in exchange for the distributed cash? Which situation produces themost favorable tax result for an individual shareholder? A corporate shareholder? Why? Focus onthe possible tax treatment rather than the requirements for obtaining that treatment.

Requirement 3. [Graduate oral presentation.] Dave Tait is considering having Tait Family Fun,Inc. buy back his mothers 200,000 shares of Tait, Inc. stock for $12 million. Discuss whether thistransaction can be treated as a redemption under any of the tests of 302(b). Provide as muchassurance as possible. If not, how is the payment treated? What are the tax ramifications to hismother, Martha? Assume Tait, Inc. has adequate earnings and profits. Would this transaction offerany estate or business planning benefits to Martha or to Tait, Inc.?

Requirement 4. [Graduate oral presentation.] Refer to the email from Jackie Tait to Phil Gardner.Why might Ted Martin be interested in having Park Supply, Inc. receive a dividend (Teds words)from Tait, Inc. instead of selling the stock to a third party? How would the tax treatment differ for asale versus a redemption/dividend? Is Supply likely to receive the hoped-for tax treatment? Whyor why not? What are the advantages and disadvantages to Tait, Inc.?

Requirement 5. [Undergraduate oral presentation.] Discuss the tax issues that arise if Martha 1)gifts her property currently or 2) retains the property so that it is included in her estate. In general,what is the result if Martha dies in 2007? 2010? Some later year? What assumptions and variablesaffect Marthas decision? What quick fixes can Martha take advantage of (without creating newentities)? Do not make calculations. Assume Martha has never made any taxable gifts. Do notdiscuss the generation-skipping tax. Marthas beneficiaries include Dave, Jack, their spouses, andthe next generation.



5/21

5

Requirement 6, Graduate students only. [Graduate oral presentation.] Assume Marthacontinues to own Tait Properties, LLC., and that, upon her death (at some point in the future), theLLC interest will be transferred to Jack and Dave. How will her interest in that LLC be valued in herestate tax return? What is Jack and Daves basis in the (inherited) LLC interest? What is the LLCsbasis in the assets it owns? What planning opportunities are available? Answer the question using

2007 values and tax rates/rules.

Requirement 7. [Undergraduate oral presentation.] Refer to the excerpt from the OfferingMemorandum for Dreamland Park and Resort, LLC. Describe, in general, how the LLC will treateach of the items shown in the Uses of Cash chart (Total Amount column). Describe whendeductions can be claimed for costs that cannot be expensed immediately. What tax return reportingissues must be addressed? For depreciable property, do not try to determine the recovery period.

Requirement 8. [Graduate oral presentation.] Refer to Jackies July 10 email to Phil Gardner.When does Tait Construction recognize the profit on construction of the Dreamland facilities?Describe what would happen if actual costs in 2010 are $1 million greater than expected.

Requirement 9, Graduate students only. [Graduate oral presentation.] The LLC that will ownand operate Dreamland, LLC was funded 1% by Tait Park #50, Inc. (the management company), and99% by the individual and corporate investors. During the partnerships operating years, 10% oftaxable income and cash flows will be allocated to Tait Park and 90% of taxable income and cashflows will be allocated to the investors. Is this an acceptable allocation of partnership income? Whyor why not? What additional information would you need to be sure?

Requirement 10, Graduate students only. [Graduate oral presentation.] Refer to Daves letter toPhil Gardner dated August 13, 2007. From a tax and business perspective, what is Delta trying toaccomplish with the cash versus stock offer? Will the transaction qualify as either a Type A or TypeC reorganization? What requirements must be met? What will be the tax effect to Dave if he receivescash? Delta stock?

Requirement 11. [Undergraduate oral presentation.] Two of Jackies children will be heading tocollege this year, and the other two will be starting college in the near future. In general terms,describe the types of tax-favored education-related incentives and benefits and how they are treatedfor tax purposes.

Requirement 12. [Undergraduate oral presentation.] Refer to Daves letter of March 25, 2017.Describe how various loss limitation rules apply to the 2015 and 2016 losses. Discuss the positionsDave and the IRS might take. Assume the amounts shown in Daves letter are actual tax amounts,the debt is still outstanding, and there were no transactions other than those described in Davesletter.



6/21


7/21

7

Excerpt from Fun and Frolic: A Visual History of Tait Family Fun, Inc.

Ownership chart. The following diagram summarizes the Tait Family Fun, Inc. operating andownership structure as of December 31, 2006:

The Syndications. Tait, Inc. designs, constructs, and operates the theme parks. However, Tait is notthe sole owner of each of these properties. When Tait, Inc. is ready to develop a park, it forms a newsubsidiary to act as the management company for that property. The subsidiary is named Tate Parks#(X) (with (X) being the property number). There are currently 50 such subsidiaries.

The subsidiary forms an LLC with the investors in the property. Generally, the subsidiary(management company) contributes 1% of the total cash; the investors contribute the other 99%.During the years the LLC owns the park, 10% of the LLCs profits, losses, and cash flow areallocated to Tait. On the next page, you can see a diagram of the operating structure for the newestof these entities Dreamland Park and Resort, LLC.

[NOTE: In the real world, different entity structures would probably be used in some states as aresult of the tax and business environment in those states. For example, Texas and some other statestreat LLCs as corporations for purposes of assessing a corporate franchise tax. California charges anadditional fee if the LLC has income in excess of a specified amount. In those states, the Park mightbe owned by a limited liability limited partnership (LLLP) or other entity, rather than an LLC. Weare trying to simplify the case by illustrating one structure that could be used in many states.]



8/21

8


Dreamland Park and Resort. The Taits decided years ago that they wanted to do something reallyspecial for their 50th Park. Dreamland Park and Resort (Dreamland) is shaping up to fit that goal. Forseveral years, Tait Land, Inc. has been quietly buying land in the hilly countryside near San Diego.

The company has accumulated more than 30,000 contiguous acres, and the Taits have received thesupport and enlisted the talents of local governments as well as some of the biggest names in theentertainment industry.

When completed, Dreamland will be the largest adventure and entertainment venue in the country.Phase I will be syndicated in 2007 and is expected to be operational in 2010. Dreamland, LLC willpurchase 4,500 acres from Tait Land. Tait Design has already completed architectural designs and amodel of the property. Tait Construction will build the infrastructure and facilities. Tait Parks #50,Inc. will be a 1% owner and will manage the property. The ownership chart for Dreamland, LLC isshown at the bottom of this page.

Initially, the park will include a 1,000-room resort hotel, two golf courses, and a 300-acreamusement park. Over the years, Phase I will be expanded to include 10,000 hotel rooms, a waterpark, upscale and discount shopping, three additional golf courses, a performance arts center, and anextreme action sports complex.

In the amusement park, the theme areas are based on best-selling books and movies and are designedto appeal to adults and kids of all ages. In park areas for younger children, you can find UncleRemus next to Mother Goose next to Dr. Seuss. Young adults can visit a mini-Hobbiton on the leftor Hogwarts on the right. Adults can choose among several venues: Arts with live theatrical andsymphonic performances; Sports with live, semi-pro sporting events; Mystery with Clue orNancy Drew dinner theaters; Romance with Titanic,Casablanca, and Sleepless in Seattlerestaurants; and Action withIndiana Jones and Terminatorrides.



9/21

9


Tait Properties. The Tait, Inc. headquarters building is owned by a separate company Tait

Properties, LLC. The LLC is owned one-third each by Martha, Dave, and Jack. The ownership chartfor the LLC is as follows:

End of book excerpt



10/21

Mr. David M. Tait

Tait Family Fun, Inc.

3800 E. Mockingbird Lane

Highland Park, TX 75205

10

March 17, 2007

Mr. Phil Gardner200 E. Commerce StreetDallas, TX 75207

Dear Phil:

Martha Tait, my mother, has been in the hospital for the last few days. This is her second visit this

month. The doctors say they dont think she is in imminent danger, but they also said we shouldmake sure her affairs are in order.

As incredible as this sounds (and despite all your good advice), we have never completed a thoroughestate plan for her. Her will was last updated in 1988 when my dad died.

Tait Family Fun, Inc. Mother presently owns 10% of Tait Family Fun, Inc. Father originallypurchased 10,000 shares of the stock for $5,000 when he formed the company in 1952. In 1963, hegave Mother 500 shares, or a 5% ownership interest. The stock was valued at $100,000 at that time.(NOTE: Assume gift taxes did not apply to this transfer. Ignore community property issues.). Shereceived an additional 1,167 shares from Fathers estate when he died in 1988. The additional shareswere valued at $2 million in his estate tax return. After Fathers death, Mother owned 1,667 shares,or 16.67% of the companys stock.

In 1995, we recapitalized (in accordance with a plan adopted by the shareholders) in anticipation ofgoing public. Mother surrendered her 1,667 shares in exchange for 50,000 new shares. The totalreplacement shares had the same voting rights, principal amount, and value as the original stock.

In 1996, Tait, Inc. raised $20 million ($100 per share) by selling new shares representing 40% of thetotal voting rights to investors. The new shareholders bought the stock for cash; the corporationissued only stock to them. No other cash or property changed hands, so this was not a taxabletransaction. As a result of the stock offering, Mothers voting rights were diluted to 10%, but thevalue of her ownership interest did not change her stock was worth about $5 million both beforeand after the offering.

In 2000, the company issued a proportionate 2-for-1 stock dividend; it did the same in 2004. Mothernow owns 200,000 shares (still 10% of the total; there are now 2 million shares outstanding). LastFriday, the stock traded for about $60 per share, Mothers total value is about $12 million. For bothstock dividends, all shareholders were required to receive new shares in exchange for the old shares.A cash dividend distribution was not an option.



11/21

11

Tait Properties, LLC. Mother owns a one-third interest in Tait Properties, LLC. (This entity istaxed as a partnership.) This is the limited liability company that owns Tait, Incs office space, the26-floor building across from Grand Texas Adventure Park. The appreciation in that property hasbeen tremendous! We bought the land, building, and the related personal property for $18 million;

the LLCs basis in its assets is presently $15 million. The property was appraised for $60 million lastfall; there is no debt on the property. The LLC doesnt really own any other assets. You sent us acalculation that shows that Mothers basis in the LLC interest as of December 31, 2006 was $5million.

Other property. Mother has a stock portfolio valued at about $6 million. The portfolio includesappreciated and depreciated securities. Quite a bit of this stock was purchased recently and has abasis close to its fair market value.

Alternatives. My memory is really fuzzy, but it seems that we tossed around three ideas the lasttime we discussed estate planning for Mother:

First, we discussed having Tait Family Fun, Inc. buy back Mothers stock for cash.

Second, we discussed having Mother gift some or all of her Tait, Inc. stock, her interest inTait Properties, LLC, or her stock portfolio. She would give them to some combination ofJack, me, the spouses, and the next generation the grandchildren, great-nieces, and great-nephews.

Third, we discussed having her just keep all her property with the idea that we would includethese assets in her estate when she eventually passes on.

My attention has been focused on Dreamland Park lately, so we never resolved this.

Were all hopeful that Mother will still be here 10 years from now, but we need be prepared for thealternative. Please let me know what you recommend for us to do.

Sincerely,

Dave

David M. TaitPresident

Chief Executive OfficerTait Family Fun, Inc.Motto: Our vision is your Dream(land) come true!



12/21

12

To: Mr. Phil Gardner

From: Mr. Jackson R. Tait, via email

Re: URGENT: Shareholder redemption request

Date: April 3, 2007

Hi Phil:

Ted Martin called this morning. Ted owns 100% of Park Supply, Inc. (Supply) and Park Maintenance, Inc.(Maintenance). Supply owns 2% of the Tait , Inc. stock. Maintenance owns 10% of the Tait, Inc. stock.These businesses are Subchapter C corporations that have been shareholders since Tait, Inc. went public inthe mid-1990s. Ted has been one of our biggest supporters.

Supply is a food, beverage, and supply vendor. Maintenance performs repairs and maintenance to keep parkrides and attractions in the best possible operating condition. Most of our parks have annual contracts withboth Supply and Maintenance.

Ted wanted to find out if Tait, Inc. would be interested paying a dividend (his words) of $2.3 million to buyback 100% of the stock Supply owns in Tait, Inc. Thats a favorable price $57.50 per share (for 40,000shares). The stock is currently trading at $60.

Ted has an opportunity to expand his production facilities. Hes a really conservative guy, and he wouldrather buy the new facility with cash than to obtain bank financing. I think his basis in the Tait stock is about$25 per share.

This was a courtesy cal, and hell probably either sell the stock on the market or sell it back to us. Hiscompany only owns 2% of our business, but that represents 5% of the shares traded on the market. Our shareprice will drop if that much stock hits the market at one time. Ted has always been extremely fair to us, andhe is important to us! Teds company makes sure all our facilities are clean and our rides and attractions areoperating safely. I want to make this happen if it makes sense for Tait, Inc.

I know well have to run it by the board of directors (and possibly the shareholders), but I wanted to find outyour initial take on this.

Thanks in advance,

Jackie Tait

Jackson R. TaitChief Operating OfficerTait Family Fun, Inc.



13/21

13

Excerpt from Offering Memorandum for

Dreamland Park and Resort, LLC

Sources and uses of cash flows. Dreamland Park and Resort, LLC, will be formed with initial cashcontributions of $2 million from Tait Parks #50, Inc. and $198 million from the investors responding

to this Offering. Tait Parks #50 will serve as the Managing LLC Member. Debt financing of $300million will be provided at favorable rates by an unrelated third party lender. The total cash availablefor the project will be $500 million.

Proceeds from the offering will be used to buy land and to build the amusement park, a 1,000-roomhotel, and two golf courses. The Dreamland Hotel and Conference Resort will include luxuryamenities at a moderate price. The two Dreamland Golf courses will be built using modern greenstechnology. The offering proceeds will also be used to fund pre-opening costs, such as staff hiringand training, and advertising and promotional expenses. Approximately 5% of the offering proceedswill be held for contingencies. The following chart summarizes the sources and uses of initial cashflows:

Sources of Cash Total Amount

Payment fromTait (Included

in Total) Tait Affiliate

Private offering $200,000,000 $2,000,000Contribution byTait Parks #50

Debt 300,000,000

Total $500,000,000 $2,000,000

Uses of Cash Total AmountPayment to

Tait (Included) Tait Affiliate

Legal fees for forming the LLC $500,000Commissions for selling interests inthe LLC to investors 12,000,000 $12,000,000 Tait Capital

Architectural and design costs 22,850,000 22,850,000 Tait Design

Land and infrastructure 54,000,000 54,000,000 Tait Land

Amusement park construction 120,000,000 12,000,000 Tait Construction

Golf course construction (2 courses) 31,500,000 3,150,000 Tait Construction

Hotel construction & resort amenities

Upscale rooms (100 rooms) 25,000,000 2,500,000 Tait Construction

High-end rooms (300 rooms) 21,000,000 2,100,000 Tait Construction

Mid-range rooms (600 rooms) 36,000,000 3,600,000 Tait Construction

Interest during construction period 58,000,000

Pre-opening costs 90,000,000

Cash reserves 29,150,000

Total $500,000,000 $112,200,000Total fees to Tait parties excludingpurchase price of land $58,200,000

Related party payments. Affiliates of the Managing LLC Member have been engaged to constructthe improvements and syndicate the offering. In addition, the land will be purchased from a partyrelated to the Managing Member. Total payments to parties related to the Managing Member areshown in the chart above.



14/21

14

Excerpt from Offering Memorandum for

Dreamland Park and Resort, LLC

Construction period and construction costs. Construction of the property is expected tocommence in June 2007. All operating assets are expected to be in place by February 1, 2010. The

grand opening is scheduled for May 1, 2010. Total construction costs equal $291.5 million. Of thisamount, $23.35 million will be paid as a fixed fee to Tait Construction, Inc., an affiliate of theManaging Member.

Cash flows from operations. Revenues will be received from park admissions, food and beveragesales, souvenir sales, hotel lodging, and golf course fees. Revenues and expenses are based uponprojected annual park attendance of 5 million guests. Revenues per park guest are included at about$100 per person. Hotel revenues are based on average rates of $130 and a projected 50% occupancyrate. Golf course revenues are based on 50% utilization and $60 green fees per player.

Revenues:

Park Admissions 200,000,000Food and beverages 200,000,000

Souvenir sales 90,000,000

Hotel (at 50% occupancy) 23,725,000

Golf (at 40% utilization) 2,279,500

Total revenues 516,004,500

Expenses:

Cost of items sold 145,000,000

Selling, general and administrative costs 82,560,720

Direct operating expenses 180,601,575

Debt service:

Interest 24,000,000

Principal 30,000,000

Total expenses 462,162,295

Net cash from operations 53,842,205

Cash paid to Tait (10% of net cash) 5,384,221

Cash available for investor group 48,457,984

Investor group return on investment 24.23%

Comparable figures. All figures are conservatively stated. Other amusement parks in the San Diegoarea receive 7-12 million visitors per year who spend an average of more than $110 per day.Average hotel rates in the area exceed $150 per day; occupancy rates exceed 60%. Golf course

utilization in the San Diego area is approximately 60%, with average greens fees and other revenuesof approximately $75 per person.

Taxation of the entity. Dreamland Park and Resort, LLC will be taxed as a partnership.



15/21

15

Revenue Ruling 2001-60, page 1

Internal Revenue Ruling 2001-60


16/21

16




17/21

17




18/21

18

To: Mr. Phil Gardner

From: Mr. Jackson R. Tait, via email

Re: Construction Revenues for Dreamland Park and Resort Contract

Date: July 10, 2007

Hi Phil:

Last month, we broke ground on our newest theme park Dreamland Park and Resort, near San Diego,California.

Tait Construction, Inc. will serve as the general contractor for the LLC that owns this property. We will spendthe better part of three years building the Dreamland amusement park, hotel, and golf course. The LLC paysus our general contractor fee; the rest of the construction costs are paid directly to the subcontractors.

Taits total revenues for the project are contractually fixed at $23.35 million. Our related expenses are almostentirely for project management and oversight. We expect our total expenses on the project to be $4 million in2007, $7 million in 2008, and $3 million in 2009, with wrap-up work in 2010 estimated at $6 million.

We always tend to underestimate our expenses. I will not be surprised if total costs are $21 million, but, atthis point, the $20 million figure looks reasonable. Hopefully, our total profit will be $3.35 million. Thats nota lot, given that we are overseeing a $200 million construction project, but we are pleased with the overallarrangement.

Please let me know how to report the revenues and expenses from this contract.

Thanks in advance,

Jackie Tait

Jackson R. TaitChief Operating Officer


P.S. Well have to plan a visit to this park after its finished you wont believe all the fun little twists andturns were including!



19/21

19


Mr. David M. Tait


3800 E. Mockingbird Lane

Highland Park, TX 75205

August 13, 2007


Dear Phil:

In last nights mail, I received a multi-page letter and an election form from Alpha Pharmaceuticals, Inc.

regarding their upcoming reorganization with Delta Chemicals.

The letter states that I can surrender my shares in Alpha in exchange for either 1) cash of $82 per share 2)stock in Delta Chemicals or 3) some combination of cash and stock. Delta will receive all of Alphas assetsand liabilities and will issue Delta stock and/or cash to the Alpha shareholders. Delta reserves the right tolimit total cash payments to Alpha shareholders to $30 million. To the extent possible, Delta will honoreveryones request, but, if the cash requests exceed $30 million, the actual cash will be pro rated based on therequested amounts of cash; Delta shares will be issued for the remainder. The total value of Alpha is about$100 million. To summarize Alpha transfers its assets to Delta; Delta transfers cash (up to 30%) and Deltastock to Alphas shareholders in exchange for their Alpha stock.

I own about 18,000 shares in Alpha. My basis is $10 per share. I bought the stock many years ago; it is

currently trading at about $80 per share. Delta seems like a fine company, but, at these prices, I wouldntmind reducing my investment! Until the merger was announced, Alpha was trading in the low-70s. Id like tocash out some of this increased value (and the $2 bonus Delta is offering).

Im hoping you can explain what all of this means. What is Delta trying to accomplish? I thought I had toreceive only stock in a reorganization. Can Delta really make cash payments? Why do they limit the total cashpayments to $30 million?

As always, Im glad I have your help when I have to deal with impossible issues like this!

Sincerely,

Dave

David M. TaitPresident and Chief Executive OfficerTait Family Fun, Inc.Motto: Our vision is your Dream(land) come true!


20/21

20

Mr. David M. TaitTait Family Folly, Inc.3800 E. Mockingbird LaneHi hland Park, TX 75205

March 25, 2017 [Not a typo this is ten years later]


Dear Phil:

Last week, we took the whole family to Dreamland Park in San Diego to celebrate Mothers 85thbirthday. As you know, weve just finished construction on Phase III, and were starting to syndicatePhase IV. Tait Land still owns about 10,000 undeveloped acres theres no telling what this placewill be like in 50 years!

We stayed in the Dreamland Speed City Adventure Resort in the valley near the main park. Fromour room, we could see the race tracks (drag strip and speedway). We shopped our way from oneend to the other of the new (Phase III) super-mall. We rode the gondola up into the mountains for therock climbing and hang gliding adventures.

Mother wouldnt bungee jump (neither would I!), but for her birthday, she decided to ride in mystock car during guest day at the race track. No question, that woman will be here long after Imgone!

Racecar losses question. For a few years after my semi-retirement from Tait, Inc., I just raced atthe drag strip and worked on my hot rods and collector cars in the garage. Then, I met one of GordonStewarts NASCAR crew members.

One thing led to another, and I ended up with one of Stewarts cars. I set up a Subchapter Scorporation to buy it (I named the S Corporation Tait Family Folly, Inc, but thats beside the point).The car already had our logos splashed all over it, because Tait, Inc. was one of Stewarts mainsponsors for NASCARs new over-50 senior circuit.



21/21

21

The corporation paid $1 million for the car and some related equipment. I contributed $200,000 tothe S Corporation. The bank made the corporation take out a seriously expensive casualty insurancepolicy on the car, and it still took some wrangling, but the bank loaned Folly, Inc. the remaining$800,000 as a long-term, non-recourse debt. As long as I maintain the car well (and dont wreck it!),I dont see it declining in value too much.

At first, I just took the car to Taits various parks and displayed it for the kids. Tait, Inc. paid me asmall appearance fee that covered my expenses barely. Then I started driving it and things gotexpensive! I spent tons of money and time learning how to drive safely and aggressively. I havealways loved cars; I have a long history of refurbishing them, and I was motivated to learn.

Ive gotten to be a pretty good driver; last year I was third in the country in NASCARs HistoricAuto Racing Series. And I won the Weekly Historic Series race last week in Fort Worth. Winningraces at that level wont pay all the bills, but it helps.

The only way to make a profit as a driver in the lower-level NASCAR circuits is to obtain corporate

sponsorships. I had been working on that since I started racing, and it finally happened. After therace last week, I was offered a 3-year, $250,000 per year Mapsite.com sponsorship if I would displaytheir logo on one side of my race car. Of course Im going to accept; after all, Id be lost withoutMapsite (Get it? Lost?). Im hoping there might be other sponsorships and race winnings in myfuture.

Here is a summary of Follys income (and losses) for the last four years and my hoped-for incomethe next two years:

2013 $ 4,000 income2014 7,000 income

2015 (185,000) loss2016 (285,000) loss2017 (projected) 30,000 income2018 (projected) 240,000 income

Please let me know if there is anything I need to consider, or if we need to do anything related tothis.

Sincerely,

Dave

David M. TaitPresident and CEOTait Family Folly, Inc.Motto: Our driving is your worst nightmare!

Copyright 2007 Deloitte Development LLC

Documents

07 National Case Student