Questions from General Taxation

Q: Bandera Corporation has not paid a dividend for six years. This

Bandera Corporation has not paid a dividend for six years. This year, the board of directors decides to declare a dividend. It hires a consultant to update the shareholder records so that the dividend...

Q: Mr. and Mrs. Keck are in the highest marginal tax

Mr. and Mrs. Keck are in the highest marginal tax bracket. Their son, a first-year college student, earns minimal income from his summer job, and his marginal tax rate is 10 percent. Mr. and Mrs. Keck...

Q: Brillo Company uses the calendar year and the cash method of accounting

Brillo Company uses the calendar year and the cash method of accounting. On December 29, 2019, Brillo made the following cash payments. To what extent can Brillo deduct the payment in 2019? a. $50,000...

Q: WQ Corporation, a closely held family business, has not paid

WQ Corporation, a closely held family business, has not paid a dividend for the last seven years. Each year, the minutes of the board of directors’ December meeting state that WQ must accumulate after...

Q: Mr. Jackson owns a 40 percent interest in newly formed JKL

Mr. Jackson owns a 40 percent interest in newly formed JKL Partnership. The partners organized their business as a passthrough entity so that the start-up loss would generate an immediate tax savings....

Q: Mr. and Mrs. Braun own 100 percent of the stock

Mr. and Mrs. Braun own 100 percent of the stock of BB Inc., which operates a temporary employment business. Late last year, Mr. Braun was short of cash in his personal checking account. Consequently,...

Q: REW Inc. is closely held by six members of the REW

REW Inc. is closely held by six members of the REW family. The corporation owns two vans that employees use for various business transportation purposes. However, for at least eight weeks during each...

Q: Eight years ago, Mr. and Mrs. Lauffer created a

Eight years ago, Mr. and Mrs. Lauffer created a family partnership with their son, the son’s wife, their daughter, and the daughter’s husband. Each of these six individuals owns an equal interest in t...

Q: LSN, a calendar year S corporation, has 13 shareholders.

LSN, a calendar year S corporation, has 13 shareholders. Since its incorporation, LSN has retained more than $800,000 income to reinvest in its business. Because LSN is a passthrough entity, the share...

Q: Last year, Mrs. Kahn and Mrs. Toms each contributed

Last year, Mrs. Kahn and Mrs. Toms each contributed the assets of their respective sole proprietorships to a new corporation. The shareholders believed that by combining their businesses, they could i...