Fin 517 Ch. 15 Notes Debt and Taxes 15.1 The Interest Tax Deduction 1. interest tax shield – additional amount that a firm would have paid in taxes if it did not have leverage. Interest tax shield = corporate tax return X interest payments 2. because interest expense is tax deductible, leverage increases the total amount of income available to all investors 15.2 Valuing the Interest Tax Shield 1. when a firm uses debt, the interest tax shield provides a corporate tax benefit each year. 2. Because the cash flows of the levered firm are equal to the sum of the cash flows from the unlevered firm plus the interest tax shield, by the Law of One Price the same must be true for the present values of these cash flows.
For the Petersan’s their allowable expense will be $3,000.00 for their one qualifying child, and based on their AGI of $90,916.00, they are limited to a $600.00 ($3,000 x .20) credit. This calculation is made using the table on Form 2441, and then reflected on line 48 of Form 1040. There is one additional credit they will qualify for and that is the Child Tax Credit. This is an up to $1,000 tax credit (reduces tax dollar for dollar) for each qualifying child subject to income limits. The Petersan’s have one qualifying child that meets the IRS criteria for the full $1,000 tax credit.
Net working capital | Year 1 | Year 2 | Year 3 | Year 4 | | Inventory | 1,5 | 1,5 | 1,5 | | All in millions | receivables | 16,5 | 12,45 | 8,25 | | | payables | 1,6 | 1,6 | 1 | | | NWC(=Inventory+receivables-payables) | 16,4 | 12,35 | 8,75 | | | Change in NWC | 16,4 | -4,05 | -3,6 | -8,75 | | Q6. FCF = (Revenue – Costs – Depreciation) x (1 – tax rate) + Depreciation – Capital Expenditure – change in working capital. Free cash flows | Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | | Unl Net income | -59,3439 | 70,1337 | 49,3248 | 30,828 | 0 | All in millions | Depreciation | 0 | 8 | 8 | 8 | 0 | | Capital expenditures | 24 | 0 | 0 | 0 | 0 | | Change in NWC | 0 | 16,4 | -4,05 | -3,6 | -8,75 | | Free cash flows | -83,34 | 61,73 | 61,37 | 42,43 | 8,75 | | Q7. | | Year 1 | Year 2 | Year 3 | Year 4 | | NPV per year | -83,34 | 55,12 | 48,93 | 30,20 | 5,56 | All in millions | Total NPV | 56,46 | | | | | | Q8. Rate | NPV(million) | 5% | 74,97 | 10% | 61,35 | 15% | 49,65 | 20% | 39,5 | 25% | 30,63 | 30% | 22,84 | 35% | 15,94 | 40% | 9,81 | 45% | 4,32 | 50% | -0,61 | 55% | -2,89 | 60% | -5,06
This would essentially mean that investment income is taxed just like any other income under the personal income tax. Long-term capital gains and qualified stock dividends are subject to two rates under the personal income tax, zero percent and 15 percent. (Most of this income is therefore taxed at 15 percent under the personal income tax.) These tax preferences are regressive; this tax system in which those with low income pay higher taxes than the wealthy is
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.
By doing this, we can be seen that this transaction is for commercial purpose, so the profit for selling two lots which is $400,000 is added to assessable income (FCT v Whitfords Beach Pty Ltd-82 ATC 403). Conclusion: In conclusion, the first transaction is not assessable income because it has been acquired before 20th September 1985. Due to Mary had merely realized its capital assets, so the second transaction is not assessable income as well. And under The Taxation Ruling TR92/3, the third transaction is assessable income by showing the action is for commercial
This is the sum of cost of all the final products and services sold in any economy. There are categories of final products and services. The largest portion of the GDP is purchases by private consumers, from clothes and food to homes and cars, and services purchased such as utilities, housekeeping, and entertainment. Investment purchases done by companies and government spending are the other categories of the GDP. Also included in the sum are the net exports; the total exports minus the imports.
In February 2011, the case is settled, and Joe refunds $2,500 to the customer. When Joe prepares his 2010 tax return in April 2011, he will include only $1,500 of net revenues from that customer. Your Answer: False The claim of right doctrine requires the recipient of disputed funds to recognize the income. Joe will include the full $4,000 in his 2010 taxable income because he had full control over the funds. He will be allowed to take a deduction on his 2011 tax return for the $2,500 repaid the customer.
Entry for August’s week 1 and 4 payroll: Week 1 and 4’s total wages and salaries = Hamill + Robbins + Kirk + Guinness + Sprouse = 200+150+110+250+330 = $1040 The Cedarville Company only needs to pay both Federal and State Unemployment tax for Hamill, Robbins, and Kirk. Wages and salaries expense $1040.00 Withholding Taxed Payable (1040*10%) $104.00 Union Dues Payable (1040*2%) $20.80 F.I.C.A. Taxes Payable (1040*7.65%) $79.56 Cash (1040-104-20.8-79.56) $835.64 Payroll Tax Expenses $94.74 F.I.C.A. Taxes Payable (1040*7.65%) $79.56 Federal Unemployment Tax Payable ((200+150+110)*0.8%) $3.68 State unemployment Tax Payable ((200+150+110)*2.5%) $11.50 Entry for August’s week 2 and 3 payroll:
GDP measures the output of all labor and capital within the U.S. geographical boundary regardless of the residence of that labor or owner of capital. GNP measures the output supplied by residents of the United States regardless of where they live and work or where they own capital. Conceptually, the GDP measure emphasizes production in the United States, while GNP emphasizes U.S. income resulting from production. The difference, called net factor income received from abroad, is trivial for the United States, amounting to only $13 billion (0.2 percent of GDP) in 1991. This shift in emphasis brings the United States into conformance with the international accounting