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Question;160. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest86;During the current year, Waterthrush Company had operating income of $510,000;and operating expenses of $400,000. In addition, Waterthrush had a long-term;capital gain of $30,000. How does Lucinda, the sole owner of Waterthrush;Company, report this information on her individual income tax return under;following assumptions?;a.;Waterthrush;is a proprietorship, and Lucinda does not withdraw any funds from the company;during the year.;b.;Waterthrush;is an LLC, and Lucinda does not withdraw any funds from the company during;the year.;c.;Waterthrush;is an S corporation, and Lucinda does not withdraw any funds from the company;during the year.;d.;Waterthrush;is a regular corporation, and Lucinda does not withdraw any funds from the;company during the year.;161. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest87;Beige Company has approximately $250,000 in net income in 2011 before deducting;any compensation or other payment to its sole owner, Janet (who is single).;Assume that Janet is in the 35% marginal tax bracket. Discuss the tax aspects;of each of the following arrangements. (Ignore any employment tax;considerations.);a.;Janet;operates Beige Company as a proprietorship.;b.;Janet;incorporates Beige Company and pays herself a salary of $150,000 and no;dividend.;c.;Janet;incorporates the company and pays herself a $150,000 salary and a dividend of;$77,750 ($100,000 ? $22,250 corporate income tax).;d.;Janet;incorporates the company and pays herself a salary of $250,000.;162. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest88;During the current year, Shrike Company had $220,000 net profit from;operations. Carlos, the sole owner of Shrike, is in the 35% marginal tax;bracket. Determine the combined tax burden for Shrike and Carlos under the;following two independent situations. (Ignore any employment taxes.);a.;Shrike;Company is a C corporation and all of its after-tax income is distributed to;Carlos.;b.;Shrike;Company is a proprietorship and all of its after-tax income is withdrawn by;Carlos.;163. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest89;Canary Corporation, an accrual method C corporation, uses the calendar year for;tax purposes. Leticia, a cash method taxpayer, is both a shareholder of Canary;and the corporation?s CFO. On December 31, 2011, Canary has accrued a $100,000;bonus to Leticia. Describe the tax consequences of the bonus to Canary and to;Leticia under the following independent situations.;a.;Leticia owns;75% of Canary Corporation?s stock and the corporation pays the bonus to;Leticia on February 1, 2012.;b.;Leticia owns;75% of Canary Corporation?s stock and the corporation pays the bonus to;Leticia on April 2, 2012.;c.;Leticia owns;25% of Canary Corporation?s stock and the corporation pays the bonus to;Leticia on February 1, 2012.;164. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest90;Ostrich, a C corporation, has a net short-term capital gain of $40,000 and a;net long-term capital loss of $180,000 during 2011. Ostrich also has taxable;income from other sources of $1 million. Prior years? transactions included the;following;2007 net;short-term capital gains;$60,000;2008 net;long-term capital gains;35,000;2009 net;short-term capital gains;15,000;2010 net;long-term capital gains;40,000;a.;How are the;capital gains and losses treated on Ostrich?s 2011 tax return?;b.;Determine;the amount of the 2011 net capital loss that is carried back to each of the;previous years.;c.;Compute the;amount of capital loss carryover, if any, and indicate the years to which the;loss may be carried.;d.;If Ostrich;were a proprietorship, how would Ellen, the owner, report these transactions;on her 2011 tax return?;165. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest91;Shaw, an architect, is the sole shareholder of Shaw Corporation, a professional;association. The corporation paid Shaw a salary of $255,000 during its fiscal;year ending October 31, 2011.;a.;How much;salary must Shaw Corporation pay Shaw during the period November 1 through;December 31, 2011, to enable the corporation to continue to use its fiscal;year without negative tax effects?;b.;If Shaw Corporation;had taxable income of $95,000 for the year ending October 31, 2011, what is;its tax liability?;166. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest92;During the current year, Lavender Corporation, a C corporation in the business;of manufacturing tangible research equipment, made charitable contributions to;qualified organizations as follows;?;Research equipment;(basis of $70,000, fair market value of $110,000), held as inventory, to a;qualified educational organization that uses the property for research;training. The inventory was produced by Lavender earlier in the current year.;?;Stock (basis;of $30,000, fair market value of $65,000) in Olive Corporation, held for;seventeen months as an investment, to United Way. (United Way plans on;selling the stock.);?;Land (basis;of $180,000, fair market value of $220,000), held for three years as an investment;to State University. (State University plans on using the land for new;dormitories.);Lavender Corporation?s taxable income (before any charitable contribution;deduction) is $2.5 million.;a.;What is the;total amount of Lavender?s charitable contributions for the year?;b.;What is the;amount of Lavender?s charitable contribution deduction in the current year;and what happens to any excess charitable contribution, if any?;167. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest93;On December 30, 2011, the board of directors of Gull Corporation, a calendar;year, accrual method C corporation, authorized a contribution of $50,000 to a;qualified charitable organization. For purposes of the taxable income;limitation applicable to charitable deductions, Gull has taxable income of;$420,000 and $370,000 for 2011 and 2012, respectively. Describe the tax;consequences to Gull Corporation under the following independent situations.;a.;The $50,000;donation is made on February 21, 2012, by Gull Corporation.;b.;The $50,000;donation is made on April 15, 2012, by Gull Corporation.;168. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest94;During the current year, Quartz Corporation (a calendar year C corporation) has;the following transactions;Income from;operations;$450,000;Expenses;from operations;500,000;Dividends;received from ABC Corporation;100,000;Quartz owns 15% of ABC Corporation?s stock. How much is Quartz Corporation?s;taxable income (loss) for the year?;169. CHAPTER;2?CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest95;During the current year, Coyote Corporation (a calendar year C corporation) has;the following transactions;Income from;operations;$260,000;Expenses;from operations;285,000;Dividends;received from Roadrunner Corporation;115,000;a.;Coyote owns;5% of Roadrunner Corporation?s stock. How much is Coyote Corporation?s;taxable income (loss) for the year?;b.;Would your;answer change if Coyote owned 25% of Roadrunner Corporation?s stock?

 

Paper#59207 | Written in 18-Jul-2015

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