a stock purchase has no effect on the tax basis of the Company’s assets. Instead, he will be taking a stepped up basis in the stock purchased equal to the amount he pays for the stock, and the taxable income inherent in the Company’s assets remains inherent in the assets. Johnsons Services is already showing losses. While issuing debts in JS may give a rise to debt to equity ratio, the company should be careful in considering equity financing not to trigger an ownership change under Section 382 which may lead to limitations of using NOLs. Also, with even higher liabilities, it may be difficult to meet the debt service agreements if the company doesn’t have enough cash flow from operations.
ASSURED SOURCE, INC., A MICHIGAN CORPORATION, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. No. 4658-09L. United States Tax Court. (2010) STATEMENT OF FACTS: On February 19, 2008, respondent sent to petitioner a Letter 1153, which is a Trust Funds Recovery Penalty Letter, to inform petitioner of his intent to assess against it trust fund recovery penalties under section 6672 because of its failure to withhold and pay employment taxes for the first three quarters of 2007.
Incorrect answers will be marked as zero. Marks will not be awarded for explanations. Note: 2 marks each a. Economic consequences of new accounting standards are said to be consistent with efficient markets for which of the following reasons? 1) 2) 3) 4) Because of the existence of securities markets anomalies Because there could be indirect cash flow effects of accounting standard changes Because accounting policy changes affect the amount of income tax payable Because accounting changes reflect a move from historical cost to fair value b.
(TCO A) A taxpayer may litigate a tax dispute without first paying the tax in the: 0 U.S. District Court . . ; @ U.S. Tax Court. 0 U.S. Court of Federal Claims. 0 All of the above (TCO F) A business bad debt is deductible for tax purposes as a(n): .
The Commissioner of Internal Revenue determined that the Taxpayers had realized income under code section 61 and failed to report any part of their expense-paid trip of $1,372.30 in their gross income on their federal tax return. The Commissioner of Internal Revenue asserted a tax deficiency of $356.79 plus interest. The Taxpayers paid the deficiency plus interest and timely filed a suit against the Internal Revenue Service for a refund. Issue Whether the cost of the expense-paid trip of $1,372.30 is taxable income to Mr. and Mrs. Gotcher under code section 61. Decision Decision in part for the Government and in part for the Taxpayers.
14-4 What is the purpose of Code Sec. 351 in regard to transfers to corporations? Solution To avoid the deterrent when there is no change in wherewithal to pay, because the government does not want to discourage corporate formation. Under this code there is no gain or loss recognized upon transfer as long as the transferor is in control of the corporation immediately afterwards. 14-20 What tax years are available to corporations?
Another argument on income tax had been raised regarding the definition of ‘income”. The Merchant’s Loan and Trust Company filed a case in 1921 a propos the imposition of income taxes on individuals and estates. The company complained that the gain on the sale of stock by the “Estate of Arthur Ryersonx, Deceased” was not taxable. Merchant’s Loan argued that income consists of only corporate profits, and therefore, only corporate profits are taxable. But the U.S. Supreme Court ruled that the income of a non-corporate taxpayer is
B. An individual engaged in the active conduct of a business must elect not to be taxed as a partnership. C. If two people (or business entities) work together to carry on any business or financial operation with the intention of making a profit and sharing that profit as co-owners, a partnership exists for federal income tax purposes. D. The partnership form of business creates double-taxation because individual partners are taxed, and the partnership is also taxed as a separate legal entity. Want to download the Final Exam answers..??
By not complying with the duty of serving the owners’ interest a manager would allocate resources artificially and arbitrarily. This spending would be unjust and probably non-optimal, because it is not democratically authorized. Assigning duties other than serving the owners to a non-democratically selected manager would result in abandoning parts of freedom and democratic achievements. Milton Friedman’s shareholder theory of management basically says that the purpose of a business is to make money for the owner or the stockholders of the business. Friedman says that there is only one social responsibility for the business: to use its resources in order to increase its profits as long as the business stats within the rules that are assigned.
CASE BRIEF-Week 8 Style of Case and Citation: United States v. O’Hagan, 521 U.S. 642, 117 S. Ct. 2199, 138 L. Ed. 2d 724, 1997 U.S. Court Rendering Final Decision: US Supreme Court Identification of Parties and Procedural Details: Respondent, James O’Hagan, was an outsider who had access to confidential information, and he profited from the information at the expense of the company and other shareholders. The Securities and Exchange Commission (SEC) accused Respondent of Section:10(b) and Section:14(e) violations. Discussion of the Facts: Respondent was a partner in a law firm, Dorsey & Whitney, which was representing a company that was potentially tendering an offer for common stock of the Pillsbury Company. Respondent was not personally involved in the representation, but he was aware of the transaction enough to know that if he purchased Pillsbury securities now that they would increase in value once the offer went through.