Carol recently incorporated her sole proprietorship and is considering making an S election.

Carol recently incorporated her sole proprietorship and is considering making an S election. The corporation generates $200,000 of gross revenue and incurs expenses of $75,000, before paying Carol's salary. She plans to take a gross salary of $60,000 from the business, and this will be her only income for the year. Task: Com ...continues

Richard plans to invest $100,000 for a 50 percent interest in a small business. His friend Jack will also invest $100,000 for the remaining 50 percent interest.

Richard plans to invest $100,000 for a 50 percent interest in a small business. His friend Jack will also invest $100,000 for the remaining 50 percent interest. On their investment, they expect to generate 10 percent before-tax return the first year. Richard's marginal tax rate is 33 percent, and Jack's marginal tax rate is 35 p ...continues

Flat Tax

Should the federal income tax be a flat tax, which means should everyone pay taxes at the same percentage? Include brief assessments on the pros and cons of this type of a system.

End of Year Reporting - Realty Corporation, an accrual-basis, calendar-year corporation, agrees to rent office space to Tenant Company for $3,000 per month

Introduction: Realty Corporation, an accrual-basis, calendar-year corporation, agrees to rent office space to Tenant Company for $3,000 per month, beginning from January 1, year 2. On December 15, year 1, Tenant gives Realty Corporation a $3,000 deposit in addition to rent for the months of January and February. In year 2, T ...continues

Taxable Income Ruling: doctrine of constructive receipt

Introduction: Walter used the cash method to account for income from his cattle ranch. During an audit in the third year, the IRS auditor discovered a document from a customer indicating that two years earlier, Walter sold 115 heads of cattle to the customer for $77,000. The document appeared to be a tear slip, the top half of ...continues

Advantages & disadvantages of 50/50 structure for notes/stock

When Keith created a new corporation as the sole shareholder, he was advised by his accountant to consider 50 percent of the invested amount as the loan and 50 percent for the purchase of stock. Discuss the advantages and disadvantages of this structure, as compared with treating the entire investment as the purchase of stoc ...continues

Rental Income: which items are income

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Calculate Sally's AGI, Taxable Income and Income Tax

PROBLEM I Sally is age 28. Sally is single. Sally is a C.P.A. but has become disenchanted with the business world and she is taking some time to find herself. She has spent 2007 living with a series of friends. Although she has received some financial assistance from family members there is no person or group of people th ...continues

Deduction amounts for depreciation and recapture

On June 26, 2004, Elaine purchased and placed into service a new computer system costing $8,000. The computer system was used 80 percent for business and 20 percent for personal use in both 2004 and 2005. Elaine claimed only regular MACRS depreciation. In 2006, the computer system was used 45 percent for business and 55 percent ...continues

Depreciation expense deductions & Realized and Recognized gains/losses

Sam Johnson started a small machine shop, Machines, Inc., in his garage and incorporated it in March of 2002 as a calendar-year corporation. At that time, he began using his personal computer and tools solely for the business as part of his contribution to the corporation. The computer cost $2,700 but had a fair market value of ...continues