...the highest federal corporate income taxes in the world, enticing corporations to outsource where more favorable tax rates lie. Will lowering this corporate tax rate help bring back those jobs to the U.S. and decrease the growing unemployment rate? Some argue yes, while other experts say no. While we argue both sides of this topic, the goal of this paper is to leave you, the reader, with enough facts to form your own opinions to the above question. How The Income Tax Came To Be In order to learn how the current corporate tax rates came to exist, we must first look at the history of the income tax. Although the Revenue Act of 1894 established the principle of taxing corporations separate from their owners, a federal tax on corporate income was never imposed until 1909. The Revenue Act levied a 2% income tax on any incomes totaling more than $4000 in order to make up the lost federal revenue (Dierdrich 2011). In the next year, the U.S. Supreme Court deemed the Act unconstitutional saying it was not allocated according to the population size of each state. How did Congress work around this? With the same principles in mind that lie within the Revenue Act of 1894, Congress passed the Corporation Excise Tax Act in 1909 (2013). Apart from its predecessor, this Act imposed a 1% tax on corporate income totaling more than $5000 (Tax Foundation 2013); however, it wasn’t until 1913 and the creation of the 16th amendment, which allows Congress to levy an income tax not apportioned to...
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...Exercise 1 Enterprise A in the current tax year has the following activities (unit: million dong): a. Revenue from sales of goods: 20,000, including the value of returned goods of 2,000. b. Expenses declared by the enterprise for tax purpose are 16,000 (with legitimate invoices and documents). Including: * Depreciation expense of a 7-seat car (with the primary price of 2.4 billion VND, used by the Director. The car is depreciated using straight-line method within the period of 8 years): 300. * Expense for building medical facilities for employees: 100. * Salary and wages (according to labor contracts): 2,000; in which 400 is the remuneration of members of Board of Directors (not directly involved in directing production and business). * Efficiency bonuses for employees: 50 * Personal income tax payable: 150; VAT payable according to credit-invoice method: 250. * Other expenses are deductible. c. Other incomes: * Income from domestic contribution of equity capital to company B; enterprise A receives its share of income before company B pays CIT: 200. * Income from selling a machine with the price of 300, the remaining value of the machine is 20, the transfer expense is 2. Calculate the CIT payable for the tax year. Given: * The enterprise has sold the returned goods with the selling price of 1,500; the amount received is not accounted in revenue. * The enterprise pays VAT using the credit-invoice method. * The efficiency bonuses are not...
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...UNIVERSITY OF DHAKA DEPARTMENT OF ACCOUNTING & INFORMATION SYSTEMS ------------------------------------------------- ------------------------------------------------- Corporate Tax Planning ------------------------------------------------- Term Paper: Tax Incentives for Attracting FDI and Some Policy Recommendation University Of Dhaka Department of Accounting & Information Systems MBA Program Course title: Corporate Tax Planning A Term Paper on "Tax incentives for attracting FDI and some policy recommendation" Batch: 15th Section A MBA 1st Semester Date of Submission: 30th September, 2013. Letter of Transmittal September 30, 2013 To Mohammad Moniruzzaman ACA Assistant Professor Department of Accounting & Information Systems Faculty of Business Administration University of Dhaka Subject: Submission of term paper on “Tax incentives for attracting FDI and some policy recommendation” Honorable Teacher, It is our pleasure to submit this term paper featuring “Tax incentives for attracting FDI and some policy recommendation”. As a part of our MBA program we tried our best to gather relevant information for preparing a complete term paper. Without your sincere co-operation and proper guideline, it would not possible for us to prepare the term paper. For this act of kindness, we are grateful to you. This overview is not fully free from mistake due to some limitations. We hope you will accept it with gracious consideration...
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...LO1 - Corporate Taxable Income Formula * Corps. compute gross income as do other types of business entities * Are allowed to deduct ordinary and necessary business expenditures * Don’t itemize deductions (No need for standard deductions) * No personal or dependency exemptions * Exist to generate income through business activities * Nearly all corporate expenditures create either current or future tax deductions * Corporate taxable income formula is relatively straight forward * Accounting Periods and Methods * Corporations measure their taxable income over a tax year and that their tax year must be the same as their financial accounting year * Generally elect their tax year when they file their first tax return * Timing when corps. recognize income and deductions depends on their accounting method * For tax purposes corps. have some flexibility in choosing methods of accounting for individual items or transactions. However, they are generally required to use the accrual method * Corps. with average gross receipts of $5 million or less over the three prior tax years (or a shorter period for new corporations) may use the cash method. LO2 – Computing Corporate Regular Taxable Income * Most corps starts with book income and then make adjustments for book-tax differences to reconcile to the tax numbers. * Privately held corps may use tax accounting rules for book purposes. (No adjustments required) * Book-Tax Differences ...
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...profit of $60,000. Neither business distributes any funds to the owners in the year. For the current year, Tomas must report $60,000 of income on his individual tax return, but Lucy is not required to report any income from the corporation on her individual tax return. | a. | True | | b. | False | ANSWER: | True | RATIONALE: | Proprietorship profits flow through to the owner and are reported on the owner’s individual income tax return. It does not matter how much of the profit is withdrawn from the proprietorship. Thus, Tomas must report the net profit of $60,000 on his Form 1040 (Schedule C). Shareholders are required to report income from a C corporation only to the extent of dividends received. Consequently, Lucy has no income to report from the corporation for the current year. | POINTS: | 1 | DIFFICULTY: | Easy | LEARNING OBJECTIVES: | SCPE.HRMY.15.LO: 17-01 - LO: 17-01 | NATIONAL STANDARDS: | United States - BUSPORG: Analytic | STATE STANDARDS: | United States - AK - AICPA: FN-Reporting | KEYWORDS: | Bloom's: Application | OTHER: | Time: 2 min. | | 2. Carol and Candace are equal partners in Peach Partnership. In the current year, Peach had a net profit of $75,000 ($250,000 gross income – $175,000 operating expenses) and distributed $25,000 to each partner. Peach must pay tax on $75,000 of income. | a. | True | | b. | False | ANSWER: | False | RATIONALE: | A partnership is not a taxpaying entity. Its profit (loss)...
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...transportation company with headquarters in San Francisco. It brilliantly connects the transportation industry with technology via an app. Customers can use their mobile smart phones to request a trip which is then routed to drivers that owe their own vehicles. Uber prides themselves as leaders in the corporate social responsibility world. Writer will investigate why Uber do not pay corporate taxes. Uber as a leader of a corporate social responsible company If one looks at Uber’s business model one can see why Uber pride themselves as leaders in the corporate social responsible world. Uber enables people to efficiently uses capital and they also enhance consumer welfare by reducing consumer’s incentives to purchase automobiles; ensuring them saving money but also help reducing environmental harms by having less automobiles on the road. They also opened the possibility of maybe opening car park spaces to new environmental friendly uses. Uber offers ease of ordering, certainty of car arrival time, ability to see the route taken, ease of payment, and quality control (vennli.com). Uber’s vehicles are not wheelchair accessible for their clients. They decided to become more corporate social responsible and have partnered now with third party groups that do operate these type of vehicles. Uber has also updated its app to voiceover for the blind people to be able to book a taxi. They also employ woman and disabled people. All these social responsible commitments have a positive...
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...Chapter 22 Xiaonan Li 11. a. No. b. No. c. No. d. Yes. e. Yes 19. a. – d. + g. – j. + m. + b. + e. – h. – k. + n. – c. – f. + i. – l. – o. – 24. a. Net sales $140,020 Depreciation recapture income 14,000 $154,020 Deduct: Cost of goods sold $42,000 Administrative expenses 15,000 Depreciation expense 13,000 (70,000) Nonseparately computed income $ 84,020 b. $84,020 ÷ 4 = $21,005 28. a. Absent a per-books election, the income is allocated by assigning an equal portion of the annual income of $1 million to each day (or $2,739.72 per day) and allocating the daily portion among the two shareholders. Thomas is allocated 50% of the daily income for 90 days from January 1 through April 1, or $124,657.72 ($2,739.73 ÷ 2 ×91). Thomas’s estate would be allocated 50% of the income for the 274 days from April 2 through December 31, or $375,342.28 ($500,000 – $124,657.72). Ralph would be allocated $500,000 for the full year. b. If the per-books election is made, the income of $400,000 from January 1 through April 1 is divided equally between Ralph and Thomas, so that each would be allocated $200,000. The income of $600,000 from April 2 through December 31 is divided equally between Ralph and Thomas’s estate, or $300,000 to each. 34. a. Beginning AAA $715,000 Add: Sales income $206,000 ...
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...Corporation Special Situations and Organization Structure (50 pts) Jane, Hunter, Renee, and Lynn form Bradley Corporation with the following consideration: | Basis to Transferor | Fair Market Value | Number of Shares Issued | From Jane - Equipment ($20,000 of depreciation taken by Jane in prior years) | $90,000 | $270,000 | 50* | From Hunter - Secret process | $5,000 | $100,000 | 20 | From Renee - Cash | $50,000 | $50,000 | 10 | From Lynn - Inventory | $85,000 | $130,000 | 20** | *Jane receives $20,000 cash in addition to the 50 shares **Lynn receives $30,000 cash in addition to the 20 shares. Assume the value of each share of Bradley Corporation stock is $5,000. As to these transactions, provide the following information in an MSWord document or Excel spreadsheet: 1. Jane’s recognized gain or loss and its treatment. 2. Jane’s basis in the Bradley stock. 3. Bradley Corporation’s basis in the equipment. 4. Hunter’s recognized gain or loss. 5. Hunter’s basis in the Bradley stock. 6. Hunter’s Corporation’s basis in the secret process. 7. Renee’s recognized gain or loss. 8. Renee’s basis in the Bradley stock. 9. Lynn’s recognized gain or loss. Identify the treatment given to any such gain or loss. 10. Lynn’s basis in Bradley’s stock. 11. Bradley Corporation’s basis in the inventory. For each item, numbered from 1-11 to sync with the assignment, provide a brief (1-3 sentences) explanation of how you calculated your...
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...the countries with the lowest corporate tax rates dont have well developed and stable economies. So, investors and corporations will recognize the benefits of the low corporate tax rates but will be skeptical of the risks involved. However, Irelands a country that has a stable industrial economy and has one of the lowest corporate tax rates 12.5%. So, it is evident why many corporations are gravitating towards Irish economy and are willing make investments in the country. The report also indicted that “Over the past thirteen years, countries across the globe have reduced their corporate income tax rates, considerably reducing the worldwide average tax rate. In 2003, the worldwide average was approximately 30 percent. By 2016, the average rate had declined by roughly 7 percentage points to 22.5 percent.” It is clear that there is a downward trend of the global corporate tax rate and that is mainly because...
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...| Improvement of Corporate Tax Audit: Factor of Increasing Tax Compliance in Malaysia | | Table of Contents Executive Summary 3 Introduction………………………………………………………………………………………..4 Tax Compliance, Tax Evasion and Tax Audit…………………………………………………….4 Tax Audit in Malaysia…………………………………………………………………………….6 Organization Structure…………………………………………………………………………….8 Tax Audit Process…………………………………………………………………………………9 Tax Audit: Constraints and Problems……………………………………………………………11 Recommendations………………………………………………………………………………..16 Conclusion……………………………………………………………………………………….18 References……………………………………………………………………………………….19 Appendix………………………………………………………………………………………...20 Executive Summary The Malaysian tax system follows the concept of self-assessment system (SAS). Under the SAS, the government trusts and gives taxpayers full responsibility to calculate, to pay and to report their tax due on their own. The success of SAS not only depends on the good tax administration but also depends on the taxpayer awareness, which is indicated by the taxpayer compliance in fulfilling his obligation. In order to enhance the level of tax compliance, the Inland Revenue Board of Malaysia (IRBM) considers that it can be achieved by law enforcement besides tax consultation and tax service. Law enforcement comprises of tax audit, tax investigation and tax collection. Tax audit becomes important since it can cause a deterrent effect to increase taxpayer compliance. Tax audit plays an important role in determining the...
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...This paper seeks to glean an understanding of corporate tax shelters, in respect to legal and ethical considerations. Tax shelters are often viewed with negative connotations, yet the general public holds different perceptions of the various classifications of tax shelters, tax avoidance, tax evasion, and tax flight (Kirchler, Maciejovsky, & Schneider, 2003). While this suggests a tolerance based on legal concerns, there exists a growing accountability for corporate social responsibility, “whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees, shareholders, communities, and others stakeholders, as well as their environment” (Guliani, 2014, p. 1117). Part of this includes, “companies paying their due taxes and obeying the law” (Guliani, 2014, p. 1120). In order to analyze the ethicality of tax shelters, this paper will introduce a variety of corporate tax shelters, discuss corporate tax shelters in relation to tax avoidance and tax evasion, explore the impact of corporate tax shelters on stakeholders, and examine the affect corporate social responsibility has on tax liability. A Legal and Ethical Examination of Corporate Tax Shelters As each business embarks on a pursuit for profit, companies often find opportunities to reduce tax liabilities in the form of corporate tax shelters. Corporations should be aware that when reducing tax liability, they must consider the legality and...
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...Problem Assignments 38. Kevin deliberately omitted $40,000 of gross income from the restaurant that he owned from his 2012 tax return. The return indicates gross income of $ 200,000 when he files it on April 14 2013. As of what date can the IRS no longer pursue Kevin with the threat of collection of the related tax, interest, and penalties? Answer: There is no statute of limitation. The IRS can pursue Kevin with additional taxes, interest, and penalties if they are able to prove fraud was committed by deliberately omitted $40,000 of gross profit. However if the IRS is unable to prove Kevin deliberately omitted $40,000 of gross income as fraud expire date would be April 15, 2016. 42. When Keith created a new corporation as a sole shareholder, he was advised by his accountant to treat 50 percent of the amount invested as a loan and 50 percent as a purchase of stock. What are the advantages and disadvantages of this structure as compared with treating the entire investment as a purchase of stock? Answer: The advantages of treating 50 percent of the amount invested as a loan and 50 percent as a purchase of stock this structure as compared with treating the entire investment as a purchase of stock is Keith will be able to deduct interest from the company gross income as a sole shareholder and pay interest on the company debt. The disadvantage of not treating the entire investment as a purchase of stock is the dividends would be...
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...INSTRUCTIONS FOR FILING 2010 U.S. CORPORATION INCOME TAX RETURN April 08, 2011 SIGNATURE: An authorized officer of the corporation should sign and date the return at the bottom of the first page. FILING: File your 2010 Form 1120, U.S. Corporation Income Tax Return, (or Form 1120-H, U.S. Income Tax Return for Homeowners Associations) with: Department of the Treasury Internal Revenue Service Center Cincinnati, OH 45999-0012 File your 2010 Form 1120/1120-H on or before: March 15, 2011 The IRS may treat tax returns and estimated tax payments that are lost in the mail as not filed on time, unless you send them by registered or certified mail. To avoid the risk of your tax return being lost, mail it via (1) certified U.S. mail, return receipt requested, or (2) one of the private delivery services listed in the IRS instructions under "When to File." Save the receipt, and you will be presumed to have timely filed your return - even if it is not received by the IRS. TAX DUE OR REFUND, OVERPAYMENT, ESTIMATED TAXES: No tax is due with your Federal income tax return. Form 1120 U.S. Corporation Income Tax Return For calendar year 2010 or tax year beginning , 2010, ending G See separate instructions. Name OMB No. 1545-0123 Department of the Treasury Internal Revenue Service , B C 2010 Employer identification number A Check if: 1 a Consolidated return b 2 3 4 (attach Form 851) Life/nonlife consolidated return Personal holding co (attach Sch PH)...
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...unincorporated business with one owner who pays personal income tax on profits from the business. With little government regulation, they are the simplest business to set up or take apart, making them popular among individual self contractors or business owners. The benefit of the sole proprietorship is the tax advantage. The disadvantage of a sole proprietorship is obtaining capital funding. - Liability: The owner is personally liable for claims against the business. If a sole proprietorship losses a lawsuit or otherwise finds itself in debt, not only will the business be liable for the debt, but the owner will be as well. - Income Taxes: As a sole proprietor...
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...requirements-form to be filed if business name does not contain owner’s name | The owner is fully liable for all debts of the business and personal assets are subject to the claims of business creditors | Not subject to corporate income tax and no tax return is filed on behalf of business. The reports of business income or business loss is based on individual tax rate | The internet has provided more opportunities for even sole proprietors to go global- Collecting money owed can be challenging through laws and regulatory agencies as they differ between countries | Partnership | | | | | | Limited Partnership | | | | | | Corporation | A fictitious legal entity that exists as an independent “person” separate from its principles. A corporation can be privately or publicly held. | A corporation probably has the most formal filing and reporting requirements. In order to form a corporation you have go through state law filing, and formation is governed through state statutes. | Limited liability because the owner of the corporation, stockholders, is not liable for its debts or acts. | Considered a separate legal, taxable entity from the owners for income tax purposes. Meaning corporations pay tax on their earnings and then the tax is paid again if corporate earnings are distributed to shareholder in the form of dividends. This is known as double taxation. | | Business Entity | Issue | | Characteristics | Formation | Liability | Taxation | Global...
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