Jane Smith tax issues: Issue a) What are the different tax consequences between paying down the mortgage (debt) and assuming a new mortgage (debt) for federal income tax purposes? Jane questioned whether they should take the $300,000 fee and use it to pay off their house, so that they could purchase a bigger house. She is asking if they should pay off the current house first and purchase a new one; or, buy a new house first and then sell the old house. Applicable Law & Analysis: The tax savings from the mortgage interest is only based upon the additional amount that the itemized deductions exceed the standard deduction. (Military.com, 2012).
Assume CCS's tax rate is 35 percent. a. How much total income tax will Custom Craft Services and Jaron pay (combining both corporate and shareholder level tax) on the $200,000 taxable income for the year if CCS doesn't pay any salary to Jaron and instead distributes all of its after-tax income to Jaron as a dividend? b. How much total income tax will Custom Craft Services and Jaron pay (combining both corporate and shareholder level tax) on the $200,000 of income if CCS pays Jaron a salary of $150,000 and distributes its remaining after-tax earnings to Jaron as a dividend?
(4 pts) Answer The inheritance of a car from your grandmother valued at $5,000 would be excluded from income as long as the $5,000 was under the caps. The tax code where you would find this would be under sections 101-139. Chapter 5 3. Shaun & Kayla earned the following in 2013: Interest on a Savings account of $36, Interest on a U.S. Series EE Savings Bond of $25, Interest on a CD that has not matured yet of $20. How much taxable interest income must they report on their 2013 tax return?
The result is this one: 0.082 (1-0.3879) = 0.05019. The other after tax costs are 0.050498 and 0.05738, respectively for $133 million bond and $100million bond. From the information taken above we conclude that the Cost of total debt = (0.05738 + 0.050498 + 0.05019) / 3 = 0.0526 (5.26%) Cost of the equity, we calculated on question nr 3, and it is 17.6525 %. To sum up, the cost of the capital is nothing more than the sum of the cost of equity and cost of debt, the calculation is this: Cost of capital = 17.6525 % + 5.26% = 22.91 % QUESTION 5: If Wonder Bar uses book value rather than market value to determine its capital structure, what is the impact of the cost of capital on its budgeting decisions? Market value is simply the amount of money that people are willing to pay for a stock.
You decide week 6 The stock should not be purchase by Mr. Jones. Mr. Jones acquiring the assets, liabilities and also would inherit the contractual obligations of the selling corporation, would, be the results of the purchase. In lay terms, he has bought the existing Smithon Corporation and he is responsible of ensuring daily operations run efficiently but the tax aspect of acquisition he is responsible for existing and any future tax liabilities that the selling corporation had. It would be my advice for Mr. Jones to not buy the stock because of the liability of current and future tax obligations which Mr. Jones would incur from the purchase of the stock. Since the tax identity of Smithon corporation would have not ceased, it is not
If BC continues to operate as a sole proprietorship with the expected income and expenses, the business income and expenses would be included on your personal return and taxed at the 35% rate, resulting in $56,000 income taxes owed. If BC were incorporated and paid out 70,000 to yourself, this would result in corporate income taxes owed of $18,850. As you can see, a considerable tax savings is available if BC is taxed at the corporate level, rather than on your individual
Calculate the PAYG instalment income for the quarter. FBT rate varied Variation of FBT Fringe benefits ATO instalment preprinted on BAS 19 F1 2 400 Estimated total fringe benefits tax payable for year Varied fringe benefits tax instalment amount Transfer the amount at F3 to 6A on the BAS Summary F2 F3 F4 12 000 3 000 30 Reason for variation PAYG rate varied PAYG income tax instalment For the QUARTER from 1 Oct 20XX to 31 Dec 20XX Option 2: Calculate PAYG instalment using income times rate PAYG instalment income T1 $ 5 5.61 4 5 % 6
The second ratio measures the effect of interest; it indicates the proportion of earnings before interest and tax that is retained after paying interest. It should be considered together with the leverage component (assets/equity). The third ratio measures the company’s operating profit on sales; it can be broken down into subcomponents such as gross profit margin. Common-sized income statements can help with
(1) John Smith's Tax Issues: (a) How is the $300,000 treated for purposes of federal tax income? Applicable Law & Analysis: Section 61(a) of the Internal Revenue Code defines gross income as income from whatever source derived, including (but not limited to) “compensation for services, including fees, commissions, fringe benefits, and similar items.” I.R.C. § 61(a)(1). Conclusion: Courts consistently have upheld the determination that wages fall within section 61(a)(1)’s definition of compensation and, accordingly, constitute taxable income.61(a)(1)’s definition of compensation and, accordingly, constitute taxable income. Eligible sources of gross income may be located in section 861 The United States Supreme Court has interpreted