However, if the claimant receives a lump sum, the claimant excludes that amount but may be taxed on any yield from the investment of the lump sum. On the other hand, if a casualty insurer invests the same lump sum and pays the investment yield to the claimant in the form of a structured settlement, no part of this investment yield is taxable to the claimant. (Little, Meyers, 2012, para. 12). Conclusion: If the lawsuit can be collected on an annuity basis in a structured settlement, then John’s fee could potentially be non-taxable.
Address his issues point by point: 1. Outright purchase of Smithon stock: a. Should Mr. Jones purchase the stock of Smith outright, leaving Smithon intact? What about issuing debt in his Johnson Services company to pay for the Smith Company-would that raise debt to equity
Chapter 15 52. [LO 3] Evon would like to organize SHO as either an LLC or as a C corporation generating an 11 percent annual before-tax return on a $200,000 investment. Assume individual and corporate tax rates are both 35 percent and individual capital gains and dividend tax rates are 15 percent. SHO will pay out its after-tax earnings every year as a dividend if it is formed as a C corporation. Assume Evon is the sole owner of the entity and ignore self-employment taxes.
Corporations can claim capital losses only against capita gains. Disallowed capital losses can be carried back 3 years and forward 5 years. For individuals capital losses are treated as deduction for a loss on dispositions of stock. Gains on sale remains capital gains. Lastly, Code Sec.
Law and Analysis The taxpayer relief act of 1997 exempted from taxation the profits on the sale of a personal residence of up to $500,000 for married couples filing jointly and $250,000 for singles. This exemption applies to residences the taxpayer(s) lived in for at least two years over the last five. Taxpayers can only claim the exemption once every two years Under § 1.121-1 Exclusion of gain from sale of principle residence of the Internal Revenue Code, the sale of the home of Mr. Junkiewicz and his wife in 2013 is not a taxable transaction as
As a CCPC, CCL will have no tax consequence for the employees receiving the stock options until they dispose of the shares. The amount taxed as employment income in the year of disposal is the difference between the option price and the FMV of the shares at the time of the option was exercised. The employee may be able to claim a deduction from taxable income equal to half this amount if the shares were worth less than the exercise price when the option was issued or the employee hold the shares for at least two years before selling the shares. There are many alternatives to rewarding employees besides cash bonuses and stock options. Options can range from published recognition to merchandise such as shirts that the company makes.
CONCLUSION MegaCorp, Inc. must capitalize the $5 million payment for the infringement liability as capital expenditure. ANALYSIS According to section 162, a deduction is allowed on all ordinary and necessary expenses paid or incurred during the taxable year in carrying in on any trade or business. Unfortunately for MegaCorp, Inc., the payment of a liability owned by a company that they acquired does not qualify as necessary business expense. Section 263 states that any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate, is not allowed any deduction. Since MegaCorp, Inc. had purchased Little, Inc. and obtained all their assets, the payment for the infringement liability must be capitalized in the year
Line 17—Disposition of exercised the option is not taxable for the excess, if any, of: Property the regular tax. His regular tax basis in 1. The fair market value of the stock the stock at the end of 2009 is $20,000. Your AMT gain or loss from the For the AMT, however, Ash must acquired through exercise of the option disposition of property may be different include the $180,000 as an adjustment (determined without regard to any lapse from your gain or loss for the regular on his 2009 Form 6251. His AMT basis restriction) when your rights in the tax.
Based on the divorce agreement, Mr. Read had the options to require Ms. Read to transfer her stock directly to him or to the corporation at his election. On February 5,1986, Mr. Read elected to have the corporation redeem Ms. Read’s stock. The fair market value of Ms. Read’s MMP stock at that time was $838,724. The stock purchase agreement between Ms. Read and the corporation MMP provided that the corporation should pay a down payment of $200,000 in cash and issue to Ms. Read an installment promissory note of $638,724 with 9% annual interest from 1987 to 1989. Mr. Read guaranteed the company’s promissory note in payment for the stock.
The plan assigned 95% of the Company’s equity to SFO bondholders and 5% to SFI bondholders. As banks were to be repaid in full, they were deemed to be “unimpaired” and therefore not entitled to vote on the plan. Plan enterprise value had increased from $1.25 billion to approximately $1.4 billion. 3-Evaluate the SFO Plan and the division of claims. Why does this plan include a rights offering?