Week 4 Assignments AC553 Federal Taxes and Management Decisions Question 14-4: Code Sec. 351 allows investors to avoid recognizing gains on transfers of assets to a corporation in return of property. The purpose is to avoid discouraging investors from contributing to corporations. Corporations are considered significant stimulants of the economy. Question 14-20: Corporations may elect a calendar year, or a fiscal year, regardless of the tax years of its owners. Partnerships need to
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John Smith Tax Issues: John Smith was not considered the injured party in the lawsuit, he was the acting attorney representing a client whom was injured in an incident. John Smith was providing a service at the time and the $300,000 is considered payment for the service of representation in a legal matter. According to section 61 of the Internal Revenue Code any gross income is taxable for federal income tax regardless of the source or matter in which it was obtained. In particular compensation
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Chapter 3. Solution to 3-15 Joshua & White Technologies: December 31 Balance Sheets (Thousands of Dollars) Assets 2010 2009 Cash and cash equivalents $21,000 $20,000 Short-term investments 3,759 3,240 Accounts Receivable 52,500 48,000 Inventories 84,000 56,000 Total current assets $161,259 $127,240 Net fixed assets 218,400 200,000 Total assets $379,659 $327,240 Liabilities and equity Accounts payable
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Question 10-1 Distinguish between realized gains and losses and recognized gains and losses. You will always have a loss or a gain due to an exchange transaction. One the transaction is completed the corresponding amount will be recorded on your income statement. Recognition exists only in the context of tax laws, in some cases the exchange transaction will be excluded under IRC Section 1031. Problem 10-47 On April 18
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AC553 Homework Week 1 3.31 Tom & Linda married filing Jointly Itemized deduction $11,950.00 4 Exemptions @ 3700 $14,800.00 AGI $40,000.00 AGI $40,000.00 (Standard/Itemized deduction) $(11,950.00) (Personal Exemption) $(14,800.00) Taxable Income $13,250.00 3.32 Marie Single 2 dependent Children AGI $70,000.00 Itemized deduction $9,000.00
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Problem 14-10 A. 1. 2011 Dividends = (1.10)(2010 Dividends) = (1.10)($3,600,000) = $3,960,000 2. 2010 Payout = $3,600,000/$10,800,000 = 0.33 = 33% 2011 Dividends = (0.33)(2011 Net income) = (0.33)($14,400,000) = $4,800,000 (Note: If the payout ratio is rounded off to 33%, 2011 dividends are then calculated as $4,752,000.) 3. Equity financing = $8,400,000(0.60) = $5,040,000 2011 Dividends = Net income - Equity financing = $14,400,000 - $5,040,000 = $9,360,000 All of
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©2011 CCH. All Rights Reserved. Chapter 5 59 Chapter 5 Gross Income—Exclusions SUMMARY OF CHAPTER Having just completed the study of gross income in the preceding chapter and thus gained a comprehension of what income is and when it is taxable, the student should now be ready to proceed to the concepts underlying exclusions from gross income, which are discussed in the present chapter. Since gross income includes income from all sources, to be excluded from gross income the items must be
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AC553: FINAL EXAM STUDY GUIDELINES The Final Exam will be administered during Week 8. It consists of 16 multiple-choice questions (five points each) totaling 80 points and 10 essay questions (17 points each) totaling 170 points for a grand total of 250 points. It is a 3.5-hour exam. There are some basic calculations involved, so a simple calculator may be useful. Showing your work will count towards your overall points, so make sure that your answer consists of more than just numbers. The Final
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AC553 You Decide Week 4 John and Jane Smith Tax issues and recommendation 1. John Smith Tax Issues: 1(a) How is the $300,000 treated for purposes of Federal Income Tax? Since the $300,000 was derived from a business activity the amount should be included in the Gross Income reported for the John Smith LLC (IRS Regulation 1.61-3(a)). The assumption is being made that none of the income has been reported previously and that the LLC using a cash basis accounting method (IRS Publication
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1. Three Types of Income (on Final) a. Active (earned) income b. Passive income - income derived from a passive activity such as working interest in oil and gas, often associated with limited partnerships i. Can only deduct passive losses to the extent you have passive income c. Portfolio income (interest, dividend, annuities, sales of stocks and bonds, royalties not derived from an ordinary course of a trader business) 2. In –class quiz d. Owned a apartment
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