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. 1(c) What potential income tax ramifications exist for Mr. Johnson personally if he purchases the stock of Smithon and converts it to an S corporation? If the Mr.Jones decides to convert Smithon to a subchapter S Corporation, it will enable the corporation itself to avoid paying taxes, but the profit and losses will be passed to shareholders as personal income and losses. Now we should consider the expected losses from the huge investment in equipment purchase. Net operating losses cannot be used to shelter personal income but can be carried forward by a C corporation to provide tax benefit in future when the business expects profit.
REQUIREMENT #1: During its first month of operation, the Parkview Landscaping Corporation, which specializes in residential landscaping, completed the following transactions: July 1 Began business by making a deposit in a company bank account of $24,000, in exchange for 4,800 shares of $5 par value common stock. July 1 Paid the premium on a one-year insurance policy, $2,400. July 1 Paid the current month's rent, $2,080. July 3 Purchased landscaping equipment from Brookwood Company, $8,800. Paid $1,200 down and the balance was placed on account.
14-24 What is the purpose of the dividends-received deduction? What corporations are entitled to claim this deduction? What dividends qualify for this deduction? The purpose of the dividends-received deduction is to reduce the effect of multiple taxation that takes place when corporations are receiving dividend income. Only dividends received from domestic corporations subject to the corporate income tax are eligible for the dividends-received deduction.
61(a),(1)) Conclusion: The tax issue here is that John Smith wants to know how the $300,000 he earned through his client fee is taxed. The $300,000 is taxed as ordinary income and is taxed in the year received. John Smith worked on the case for two years but he did not earn the $300,000 until this year so he will include it in this year’s taxable income. Therefore John Smith needs to include the entire $300,000 as ordinary income on his Federal tax return Issue b) How is the $25,000 treated for purposes of federal tax income? Applicable Law & Analysis: “Gross income does not include income attributable to the recovery during the taxable year of any amount deducted in any prior taxable year to the extent such amount did not reduce the amount of tax imposed by this chapter.“ (IRC Sec.
Cash basis also records accounts payable the date that it was paid rather than the billed date. Those are the two main differences on how it reports monetary data, other differences are the type of businesses that would utilize the two different accounting basis. Smaller business would most likely use cash basis simply because it is easier to manage. One major benefit to cash basis is that it identifies more clearly cash on hand, but a major down side is that it paints a bad picture of the company’s services that it performs. It paints a bad picture because the business may collect zero revenues for a month and pay accounts payable during that month showing a loss of revenue while the next month they may pay zero accounts payable but receive two month’s worth of accounts payable, this would indicate that the company had higher than realistic earnings.
The apartment building was bought and subsequently leased to Aaron and Regina Feiwish for a three year term at an agreed upon rental of $8,500 a year payable in installments commencing on October 1, 1938. In June 1939 Louis Miller executed and delivered three promissory notes to Regina Feiwish, payable in one year, as evidence of a cash loan of $3,500. The three notes were in the amounts of $500, $1,000 and $2,000 with an additional $350 bonus in consideration of her making the loan. All note payments were subsequently applied to the rent due under the lease agreement and the $350 was subsequently issued as rent discount and a deduction was claimed on the 1939 return. At some point subsequent to October 1, 1939, Aaron and Regina Feiwish began negotiations with Minnie Miller for the purchase of the building.
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
Since the company owed $1,600 to creditors and there are sufficient funds to pay them, the creditors will receive $1,600. The investors will receive the balance of $200. c. Kennedy Company Accounting Equation Event Assets = Liabilities + Stockholders’ Equity Cash Notes Payable Common Stock Retained Earnings Acquired assets $3,400 $1,600 $1,800 earned profit 1,600 1,600 Balance $5,000 = $1,600 + $1,800 $1,600 The creditor will receive the $1,600 that is owed to them. The stockholders will receive their initial investment of $1,800 plus an additional $1,600 of profit for a total of $3,400. EXERCISE 1-4 Entities Distribution of Cash Mr. Chang (personal account) Personal account was decreased by the $30,000 cash deposited in the Chang Enterprises’ business account.
The equipment was acquired on January 1. It had a $1,000 estimated salvage value and a three-year useful life. 7. Sold inventory to customers for $25,000 that had cost $14,000 to make. Required Explain how these events would affect the balance sheet, income statement, and statement of cash flows by recording them in a horizontal financial statements model as indicated here.
Don’t get me wrong, I am for the taxes for the wealthy, but I’m not for exorbitant taxes. Exorbitant taxes are what caused this wealthy rich to take an interest in influencing congress in the first place. Why would they put it back to where it was before and even add more taxes as Krugman proposes? People need to consider a fair amount to tax them so that they do not have to take such drastic measures to get tax cuts or even exempt themselves all together as Krugman notes that other do business overseas to avoid taxes