Question & Answer

What is the mechanism by which carbon strengthens steel during heat treatment?

Maria has been operating Mansfield Park as a C corporation and decides she would like to make an S election. What is the earliest the election will become effective under each of these alternative scenarios? a. Maria is on top of things and makes the election on January 1, 2024. Effective Jan. 1, 2024 b. Maria is mostly on top of things and makes the election on January 15, 2024. Effective Jan. 1, 2024 c. Maria makes the election on February 10, 2024. She needed a little time to convince a C corporate shareholder to sell its stock to a qualifying shareholder. That process took all

How do parents determine who claims the child as a dependent if the child is a qualifying child of both parents when the parents are divorced or file separate tax returns?

How are the tax issues associated with home offices and vacation homes used as rentals similar? How are the tax issues or requirements dissimilar?

What information is conveyed by the TTT curve?

Benjamin recently bought a truck in Alabama for his business in Georgia.  What different types of federal and state taxes may affect this transaction?

To what extent was the debt crisis of the early 1980s caused by inappropriate policies that had been pursued by the debtor countries?

Machinery purchased for $60,000 by Tom Brady Co. in 2010 was originally estimated to have a life of 8 years with a salvage value of $4,000 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2015, it is determined that the total estimated life should be 10 years with a salvage value of $4,500 at the end of that time. Assume straight-line depreciation. Instructions (a) Prepare the entry to correct the prior years’ depreciation, if necessary. (b) Prepare the entry to record depreciation for 2015.

Identify the most common types of coating processes.

Explain the relative risk of the various types of securities in which a money market fund may invest. (LO3)

Kamal contributed $10,000 in cash and a capital asset he had held for three years with a fair market value of $20,000 and tax basis of $10,000 for a 5 percent capital and profits interest in Green Valley LLC. a. If Kamal sells his LLC interest 13 months later for $30,000 when the tax basis in his partnership interest is still $20,000, how much gain does he report, and what is its character? b. If Kamal sells his LLC interest two months later for $30,000 when the tax basis in his partnership interest is still $20,000, how much gain does he report, and what is its character? [Hint: See Reg. §1.1223-3.]

reported the following information regarding 2013–2014 inventory.     Instructions (a) Why might Robots, Inc., use two different methods for valuing inventory? (b) Comment on why Robots, Inc., might disclose how its LIFO inventories would be valued under FIFO. (c) Why does the LIFO liquidation reduce operating costs? (d) Comment on whether Robots, Inc. would report more or less income if it had been on a FIFO basis for all its inventory.

Amy is evaluating the cash flow consequences of organizing her business entity SHO as an LLC (taxed as a sole proprietorship), an S corporation, or a C corporation. Amy used the following assumptions to make her calculations: a)      For all entity types, the business reports $22,000 of business income before deducting compensation paid to Amy and payroll taxes SHO pays on Amy’s behalf. b)      All entities would use the cash method of accounting. c)      If Amy organizes SHO as an S corporation or a C corporation, SHO will pay Amy a $5,000 annual salary (assume the salary is reasonable for purposes of this problem). For both the S and C corporations, Amy will pay 7.65% FICA tax on her salary and SHO will also pay 7.65% FICA tax on Amy’s salary (the FICA tax paid by the entity is deductible by the entity). d)     Amy’s marginal ordinary income tax rate is 35 percent and her income tax rate on qualified dividends and net capital gains is 15 percent. e)      Amy’s marginal self-employment tax rate 15.3 percent. f)       Amy pays a .9 percent additional Medicare tax on salary and net earnings from self-employment (i.e., her salary and net earnings from self-employment income are over the threshold for the tax). g)      Amy pays a 3.8 percent net investment income tax on dividends and net capital gains (i.e., AGI on joint tax return is over threshold by more than any net investment income she receives). h)      Assume that for purposes of the qualified business income deduction, the business income is not from a specified service and neither the wage-based limitation nor the taxable income limitation applies to limit the deduction. i)        If SHO is formed as an S corporation or a C corporation, SHO will distribute all of its earnings after paying entity level taxes and after deducting salary and related FICA taxes paid to Amy.   Required:   a. Fill in the cells in the table below to identify cash flows associated with the income from the business if the business is formed as an LLC (sole proprietorship), S corporation, or C corporation for tax purposes. Enter cash outflows as negative numbers.     Cash flow LLC (Sole prop) S corporation C corporation Business income $22,000 $22,000 $22,000 FICA taxes paid by Amy       FICA taxes paid by SHO       Self-employment tax paid by Amy       Federal income tax paid by SHO       Additional Medicare tax paid by Amy       Net investment income tax paid by Amy       Federal income tax paid by Amy*       Cash remaining after-taxes       *Remember to consider account flow-through income, qualified dividends, the self-employment tax deduction, and the qualified business income deduction in thecalculation.                   b. At a high level, describe the factors causing differences in the after-tax cash flows from each entity, given that the before-tax cash flows are the same (don’t use dollar amounts in explanation).

How do the AMT tax rates compare to the regular income tax rates?

Does the kiddie tax eliminate the tax benefits gained by a family when parents transfer income-producing assets to children?  Explain.

Gary inherited a Maine summer cabin on 10 acres from his grandmother. His grandparents originally purchased the property for $500 in 1951 and built the cabin at a cost of $10,000 in 1966. His grandfather died in 1981, and when his grandmother recently passed away, the property was appraised at $500,000 for the land and $700,000 for the cabin. Because Gary doesn’t currently live in New England, he decided that it would be best to put the property to use as a rental. What is Gary’s basis in the land and in the cabin?

Berstler Construction Company began operations in 2014. Construction activity for the first year is shown below. All contracts are with different customers, and any work remaining at December 31, 2014, is expected to be completed in 2015. Cash Contract Estimated Total Billings Collections Costs Incurred Additional Contract through through through Costs to Project Price 12/31/14 12/31/14 12/31/14 Complete 1 $ 560,000 $ 360,000 $340,000 $450,000 $130,000 2 670,000 220,000 210,000 126,000 504,000 3 520,000 500,000 440,000 330,000 –0– $1,750,000 $1,080,000 $990,000 $906,000 $634,000 Instructions Prepare a partial income statement and balance sheet to indicate how the above information would be reported for financial statement purposes. Berstler Construction Company uses the completed-contract method.

What is a blind hole?

Henry Quincy wants to withdraw $30,000 each year for 10 years from a fund that earns 8% interest. How much must he invest today if the first withdrawal is at year-end? How much must he invest today if the first withdrawal takes place immediately?

Compare and contrast the aggregate and entity approaches for a sale of a partnership interest.

Identify a major technical problem in tube bending?

Consider a period in which stock prices are very high, such that investors begin to think that stocks are overvalued and their valuations are very uncertain. If investors decide to move their money into much safer investments, how do you think this would affect general interest rate levels? In your answer, use the loanable funds framework to explain how the supply or demand for loanable funds would be affected by the investor actions, and how this would affect general interest rate. (LO1)

Assuming adequate E&P, will the shareholder’s tax basis in noncash property received equal the amount the shareholder includes in gross income as a dividend (assuming adequate E&P)? Under what circumstances will the amounts be different, if any?

Kaymer Corporation issued 300 shares of $10 par value ordinary shares for $4,500. Prepare Kaymer’s journal entry.

Jack and Jill are owners of UpAHill, an S corporation. They own 25 and 75 percent, respectively.  a. What amount of ordinary income and separately stated items are allocated to them for years 1 and 2 based on the information above?  Assume that UpAHill Corporation has $100,000 of qualified property (unadjusted basis) in both years.