Chapter 11 bankruptcy: This form of bankruptcy is for the reorganization, or sometimes called the rehabilitation, of a business. In some cases, individuals can file this form of bankruptcy when they have substantial debts as well as a large amount of assets. Chapter 13 bankruptcy: this chapter is for rehabilitation or reorganization of debt for individuals. This type of bankruptcy does not discharge debt but allows for a process of restructuring the debt to allow for repayment. It is designed only for those who have a regular source of income since debts are stilled paid off in this program (United States Courts, 2011).
This choice does, however, affect how individual shareholders’ accounts are reported in the balance sheet. Formally retiring shares restores the balances in both the common stock account and paid-in capital - excess of par to how those balances would have looked if the shares never had been issued. Any net increase in assets produced from the sale and ensuing repurchase is reflected as Paid-in capital—share repurchase. On the other hand, any net decrease in assets resulting from the sale and subsequent repurchase is repeated as a subtraction of retained earnings. Inversely, when a share repurchase is seen as treasury stock, the cost of the treasury stock is naturally disclosed as a decrease in total shareholders’ equity.
I understand your concern for the financial statements. Thank you for the questions you asked concerning the effect on your financial statements if you lost the lawsuit. You have various questions regarding the mortgage, Chapter 11, patent impairment, and contingencies in the event Fabrikam lose the lawsuit. Filing Chapter 11 does not forgive debts. Rather, it only reorganizes debts and formats them for you to repay over time.
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? If John and Jane decide to pay off their mortgage and then selling the property they would have a larger gain than if they just sold the house and purchased another one after the sale of their current home. Since that money would then be used to pay off the current mortgage and then focus on paying the second home they would be taxed differently. Since the value of their home along with how much equity they have in it will affect how large their recognizable gain is they should consider that before making any decisions. (3) Issue b) Can John and Jane Smith utilize a 1031 tax exchange to buy a more expensive house using additional money from John's case?
Transfers between governmental and business type activities are eliminated and do not appear on the government-wide Statement of Activities. C. In the government-wide Statement of Activities, special items are those items that are both unusual, infrequent, and are not under the control of management. D. Taxes levied for specific functions may be reported as program revenue. 6. Which of the following choices regarding the proprietary fund financial statements is true?
[LO 1] Under what circumstances, if any, can a taxpayer fail to meet the ownership and use requirements but still be able to exclude all of the gain on the sale of a principal residence? The taxpayer may be able to exclude the gain on the sale of a principal residence when she sells the home due to unusual
Lucas will be in default under the credit arrangement if there is a “material adverse change” in its financial condition. “Material adverse change” is not defined in the loan documents. The Company believes the likelihood of default is remote. The bank has no relationships with Lessor Co. In this particular capital lease, the lessor requires Lucas Co to pay for general repair and maintenance.
[3] http://www.irs.gov/businesses/small/article/0,,id=146335,00.html It is important to determine if the taxpayer martially participates because this classifies the income as active or passive. Passive activity losses are non-deductable from active and portfolio income. This is why it is important to determine if the taxpayer martially participates in the business activity. PROBLEMS: 7-46) The $30,000 loss is considered a passive loss and can only be deducted against passive income, it is therefore suspended and carried forward to future years to offset potential passive income in those years. Mary has no martially participation in the rental activity, therefore the loss is considered
H&R Block This case is a federal class action suit against H&R Block. H&R Block offers refund anticipation loans (RALS) a RAL is a short term loan that is funded either the day the client does their federal tax return or the next day this loan is given out at a substantial interest rate for someone that is entitled to a refund on their federal tax return. Block also offers refund anticipation checks (RACS) as part of their tax services. The RAC is when you don’t have the money to pay for your tax services. H&R Block will charge a convenience fee to take the tax preparation fee out of the person’s tax refund.
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