The Income Tax Return: A Framework for Engineering Economics

Statement This paper will explore the use of the income tax return as a capstone project in an Engineering Economics course. Introduction As educators, we are faced with the task of connecting textbook theory to real-world application. In Engineering Economics courses, the income tax return is the ideal way to tie together all ‘engineering economics’ topics while, at the same time, demonstrating the practicality of the course topics. ‘Engineering economics’ courses have an overarching goal of analyzing the economic aspects of engineering and industrial projects. Focus is on decision making. Typical topic coverage includes the following components. • capital budgeting • Project cost estimation • Break-even analysis • Depreciation • Taxation Each of these concepts can be reinforced through the study of the individual income tax return, and the process allows for thought-provoking pro-forma decision analysis. This paper will explore all aspects of this Kansas State University student project, while giving practical advice in implementing its use in other university ‘engineering economics’ classrooms. Student Needs and Project Objectives An income tax return project utilized in the undergraduate Engineering Economics course at Kansas State University originated to meet three objectives. • Create students’ awareness of the federal income tax system and reinforce their responsibilities as U.S. taxpayers. • Demonstrate the tax implications of business investment transactions. • Provide for students a framework that binds all topics covered in the engineering economics course. After teaching the course for the first time, the instructor found there was a need for such a project. She found a majority of students enrolled in the engineering economics course were interested in someday owning their own businesses. These traditional-aged college students Proceedings of the 2005 Midwest Section Conference of the American Society for Engineering Education