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.
A sales tax table is provided by the IRS to determine a taxpayer’s general sales tax deduction. Or a taxpayer may use actual figures using receipts saved during the tax year. If a big ticket item is purchased during the tax year, it may be more beneficial than the deduction for state income tax. However, for the Petersan’s their state income tax withholding and mandatory state disability withholdings are greater than the allowable sales tax deduction. Total itemized deductions reported on Schedule A are $18,014.
How is the $25,000 treated for purposes of federal tax income? The issue is how the $25,000 of reimbursed expenses will be treated for federal income tax purposes. According to the Internal Revenue Code Sec. 162, “Ordinary and necessary expenses incurred to carry on a trade or business are deductible.” Since the $25,000 reimbursed expenses were in relation to the services provided, it will need to be included in gross income but will be treated as a deduction to the adjusted gross income. c. What is your determination regarding reducing the taxable amount of income for both (a) and (b) above?
Box G7 or Box G18 Activity 5.7 In Activity 5.1 you used the BAS worksheet to complete the quarterly BAS for The Nice Scent Shoppe. Now we will give you some further information for that quarter and you are to complete the BAS Summary report using Option 2 for PAYG income tax instalment. 1. The FBT instalment has been notified as $2400. The firm requires this to be varied to an annual FBT payable of $12 000.
He is claimed as a dependant on other tax return, so we cannot deduct him as an exemption. So, $3000-$5700=-$2700, which is less than zero, so his taxable income is $0. 13-55. 2008 $200,000 $50,000 $25,000 25 $ 6,250 ($25,000*($50,000/$200,000)) 2009 $300,000 $81,000 $80,000 27 21,600 ($80,000*($81,000/$300,000)) 2010 $400,000 $96,000 $125,000 24 30,000 ($125,000*($96,000/$400,000)) Total taxable income
Provide examples of each in your discussion. week 2 Compare and contrast realization of income for income tax purposes with recognition of income for financial accounting purposes. Gambling losses are miscellaneous deductions not subject to the AGI floor. Explain why this
Again, note that the actual state rate is reduced by 25% to allow for the deductibility of state income taxes on the federal income tax return. If Dana’s state tax rate increases to 10%, corporate bonds are still superior to Treasury bonds. 50. [LO 1] At the beginning of his current tax year David invests $12,000 in original issue U.S. Treasury bonds with a $10,000 face value that mature in exactly 10 years. David receives $700 in interest ($350 every six months) from the Treasury bonds during the current
Conclusion: If the lawsuit can be collected on an annuity basis in a structured settlement, then John’s fee could potentially be non-taxable. This is an option that should certainly be explored. The $25,000 in expenses should still be deductible as business expenses. Issue d) Do I get better tax benefits for paying the lease on office space or for buying the building? What are the differences?
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.
FINANCE CASE STUDY “Wonder Bars” Important information * Interest bearing debt of the company in 1994 ― $ 76,132,000 with a weighted average interest rate of 8.2% 8.25% sinking fund, n=12 years, $133 million * Coupon interest = 9.375%, $100 million WB had two long term bond outstanding Common stock, 75 million shares * Class B stock, $10 million shares The firm has 2 classes of common stocks Both stock have a price of 35$ / share and the beta of the company is 0.95 * Treasury bill = 5% * S&P 500 index = 12% in 10 years * Federal and state income tax = 40% * Sonzoni Food beta = 0.9 SOLUTION Question 1: What is WB’s capital structure? Capital structure is a way to determine