Question & Answer

Describe the three hurdles a taxpayer must pass if they want to deduct a loss from their share in an S corporation. What other loss limitation rule may impact the deductibility of losses from an S corporation?

Many years ago a famous member of Congress proposed eliminating federal income tax withholding.  What criterion for evaluating tax systems did this proposal violate?  What would likely have been the result of eliminating withholding?

Make out a case for (a) increasing and (b) decreasing the role of the government in the allocation of resources.

Why is it important to be able to determine whether a particular book-tax difference is permanent or temporary?

Jayhawk Corporation reports current E&P of $300,000 and a deficit in accumulated E&P of ($200,000). Jayhawk distributed $400,000 to its sole shareholder, Christine, on the last day of the year. Christine’s tax basis in her Jayhawk stock before the distribution is $75,000.

What is the most common fiber material in fiber-reinforced plastics?

Demarco and Janine Jackson have been married for 20 years and have four children who qualify as their dependents (Damarcus, Jasmine, Michael, and Candice). The Jacksons file a joint tax return. The couple received salary income of $105,000 and qualified business income of $10,000 from an investment in a partnership, and they sold their home this year. They initially purchased the home three years ago for $200,000 and they sold it for $250,000. The gain on the sale qualified for the exclusion from the sale of a principal residence. The Jacksons incurred $16,500 of itemized deductions, and they had $4,000 withheld from their paychecks for federal taxes. They are also allowed to claim a child tax credit for each of their children. However, because Candice was 18 years of age at year end, the Jacksons may only claim the child tax credit for other qualifying dependents for Candice.

Strategies and balanced scorecard measures for a country Brian Henshall, Foundation Emeritus Professor of Management at The University of Auckland, suggests a number of potential performance measures that could be used to monitor performance for the country of New Zealand. Henshall recommends that the measures be published monthly to gauge progress. He also argues that a discussion of potential performance measures would help citizens define what they want. Ultimately, the measures could be used to monitor the performance of elected officials. Following are some of Henshall’s suggestions.                                                    Tangible wealth: ·       gross domestic product (GDP) percentage change as a measure of growth ·       the ratio of government wealth creation to business wealth creation as a measure of government economic performance ·       GDP per person employed and per total number of people in New Zealand as efficiency measures ·       New Zealand dollar exchange rate (percentage change for last quarter or last year) as a measure of economic stability ·       number of bankrupt firms to all trading entities as a measure of business stability   Environmental intangible wealth: ·       a pollution index that measures degradation of the environment from pollution ·       a ratio of protected land relative to total government-owned land ·       a ratio of alternative energy resources relative to total energy produced Physical and social infrastructure: ·       educational expense as a percentage of GDP ·       health care expense as a percentage of GDP ·       accidents index ·       serious crimes index   Demographics: ·       changes in population growth, year to year ·       growth in education levels ·       a demographic index that monitors innovations by diversity of peoples ·       unemployment rates   Source: Information from Henshall, BD 2002, ‘Kiwi Scorecard,’ New Zealand Management, July 2002, pp. 15 ff.   Required (a)     Suppose government officials developed an objective to increase the number of college graduates because they believe increased education will lead to increased GDP. Brainstorm and identify several ideas for action plans to carry out this strategy. (b)     Pick one of your ideas from part (a) and discuss its pros and cons. (c)     Brainstorm ideas for action plans to increase the number of high school graduates. (d)     Pick one of your ideas from part (c) and discuss its pros and cons.

Explain the relationships among culture, corporate values, and business performance, and describe the tools a cultural leader can use to create a high-performance culture.

As noted in Example 1-2, tolls, parking meter fees, and annual licensing fees are not considered taxes.  Can you identify other fees that are similar?

If economics is the study of choices of how to use scarce resources, can these other objectives be legitimately described as ‘non-economic’?

What is an onerous contract? Give two examples of an onerous contract.

Danica Patrick, Inc. includes the following account among its trade receivables.   Instructions Age the balance and specify any items that apparently require particular attention at year-end.

Presented below are three revenue recognition situations. (a) Grupo sells goods to MTN for $1,000,000, payment due at delivery. (b) Grupo sells goods on account to Grifols for $800,000, payment due in 30 days. (c) Grupo sells goods to Magnus for $500,000, payment due in two installments: the first installment payable in 6 months and the second payment due 3 months later. Instructions Indicate how each of these transactions is reported.

Under what conditions will a partner recognize loss in a liquidating distribution?

What factors influence the dividend policy of a company?

What is physical vapor deposition?

Describe the accounting for actuarial gains and losses.

What should determine the choice of cost allocation method (direct, step-down and reciprocal) discussed in this chapter?

On January 1, 2014, Doug Nelson Co. leased a building to Patrick Wise Inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. 2. The leased building cost $4,500,000 and was purchased for cash on January 1, 2014. 3. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value. 4. Lease payments are $275,000 per year and are made at the end of the year. 5. Property tax expense of $85,000 and insurance expense of $10,000 on the building were incurred by Nelson in the first year. Payment on these two items was made at the end of the year. 6. Both the lessor and the lessee are on a calendar-year basis. Instructions (a) Prepare the journal entries that Nelson Co. should make in 2014. (b) Prepare the journal entries that Wise Inc. should make in 2014. (c) If Nelson paid $30,000 to a real estate broker on January 1, 2014, as a fee for finding the lessee, how much should be reported as an expense for this item in 2014 by Nelson Co.?

Assume that Sarazan Company has a share-option plan for top management. Each share option represents the right to purchase a $1 par value ordinary share in the future at a price equal to the fair value of the shares at the date of the grant. Sarazan has 5,000 share options outstanding, which were granted at the beginning of 2014. The following data relate to the option grant. Exercise price for options $40 Market price at grant date (January 1, 2014) $40 Fair value of options at grant date (January 1, 2014) $6 Service period 5 years Instructions (a) Prepare the journal entry(ies) for the first year of the share-option plan. (b) Prepare the journal entry(ies) for the first year of the plan assuming that, rather than options, 700 shares of restricted shares were granted at the beginning of 2014. (c) Now assume that the market price of Sarazan shares on the grant date was $45 per share. Repeat the requirements for (a) and (b). (d) Sarazan would like to implement an employee share-purchase plan for rank-and-file employees, but it would like to avoid recording expense related to this plan. Explain how employee sharepurchase plans are recorded.

Jessica’s friend Zachary once stated that he couldn’t understand why someone would take a tax course.  Why is this a rather naïve view?

What are some aspects of business that require knowledge of taxation?  What are some aspects of personal finance that require knowledge of taxation?

How do grain boundaries contribute to the strain hardening phenomenon in metals?

Describe some ways in which taxes affect the political process in the United States.