April 8, 2012 Tax File Memorandum From:., CPA. M.A.F.M Subject: Mr. Jones Taxpayer Engagement On today April 5th, 2012 I met with Mr. Jones regarding our Previous Meeting on April 2nd, 2012 to discuss some questions and possible outcomes about potential future financial investment decisions, and the tax ramifications of these decision and possible outcomes. Facts: Mr. Jones is considering the purchase of a manufacturing company Smithton Widgets which is very profitable. Mr. Jones is a majority shareholder in another C-Corp. Known in this case as Johnson Services which has accumulated significant losses.
Question : (TCO D) Europa Corporation is financing an ongoing construction project. The firm will need $5,000,000 of new capital during each of the next three years. The firm has a choice of issuing new debt or equity each year as the funds are needed, or issue only debt now and equity later. Its target capital structure is 40 percent debt and 60 percent equity, and it wants to be at that structure in three years, when the project has been completed. Debt flotation costs for a single debt issue would be 1.6 percent of the gross debt proceeds.
Jones decides to buy Smithon Corporation he should buy it with the exchange in stocks instead of buying the Corporation outright. This will lower his acquisition cost and in return lower his taxable income since there is no recognition of a gain or loss on an acquisition company with a stock-for-stock exchange. If he decides to buy Smithon Manufacturing he will be able to change it to and S Corp and follow the fiscal year ending on December 31st. By changing it to an S corporation he will have the profits go directly to his personal income and avoid double taxation. A merger would best be used in this situation since it will help lower his taxable income and he can improve his operations and competitiveness.
Jones purchase the stock of Smithon outright leaving Smithon intact? 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.
Corporation Tax is a tax on the taxable profits of limited companies and other organisations. Tesco is a large company in the UK, so they will have to pay corporation tax regardless were their profit is coming from. Tax has an impact on Tesco as a whole; tax will be taken of Tesco’s profit which will result in less dividence for shareholders. Invest can be put off as their main and objective is to receive the largest amount of dividence possible. Direct support With business like Tesco, the government provides direct support concerning specific business activities.
1. Outright purchase of Smith stock a) Yes, Mr. Jones should purchase the stock of Smith outright, leaving Smithon intact as purchasing the stock of Smith co. is the simple and reasonable transaction where he can also minimize the cost of administrative matters. While issuing debt in his Johnson Services Co. to pay for the Smith Company there can arise debt issue for Johnson co if the cash flow of the company is insufficient in making such purchase to buy Smith co stock. b) Converting C corp to S corp has taxation benefit as C corp faces double taxation. Here, converting Smithon to S corp can give an advantage of having a control of limited or small number of shareholders.
A couple of the advantages to preferred stock are fixed rate of dividends and no voting rights. Fixed rate of dividends means that whatever the stock is issued at percentage of par when the stock is inquired by the investor is what the dividends will remain when paid by the company. Plus, they make the investor feel more secure in their decision to buy into the company with the knowledge that preferred stockholders are paid first, the amount contracted, and even in terms of liquidation. When speaking of voting rights, stockholders do not have a say in anything the company does and does not do. The company retains its ownership with preferred stock.
Through out the Meiji period, the ruling Oligarchs made serious strides in bringing Japan from an almost medieval stage of development to a modern developed nation state. Almost all of the decisions these powerful men made in bringing their country forward were not made with the peoples best interest in mind, but rather in the Oligarchs lust for power and profit. When the Meiji rulers took over from the Tokugawa rulers, they knew they had to industrialize their country as fast as possible in order to keep up with Western technologies. For the most part the rulers used private companies to modernize the country. The private zaibatsu (10-15 extremely powerful corporations) ,the heads of which had direct ties to the ruling Oligarchs, directed the economy towards pure profit at the expense of workers rights.
Transnational Electronics (TEC) is a large manufacturer and distributor of electronic components is on the rise. With mergers and acquisitions, the company developed enough resources to expand globally. TEC recognized Shang-Wa’s capacitors demand and offered an acquisition. If this acquisition happens, the contract between LEI and Shang-Wa may not be renewed. In such a case, LEI may lose 43% of its revenue over next five years.
Question: (TCO 8) Which waiting-line model has a dependent relationship between the length of the queue and the arrival rate? 9. Question: (TCOs 6 and 7) XYZ plating is going ahead on an expansion project. They will be able to earn $300 per hour and run 3,000 hours per year. What is the net present value for the next five years with an interest rate of 6%?