Questions from Taxation

Q: Mr. JK, a U.S. citizen and resident

Mr. JK, a U.S. citizen and resident of Vermont, owns 100 percent of the stock of JK Services, which is incorporated under Vermont law and conducts business in four counties in the state. JK Services o...

Q: Taxpayer Y, who has a 30 percent marginal tax rate,

Taxpayer Y, who has a 30 percent marginal tax rate, invested $65,000 in a bond that pays 8 percent annual interest. Compute Y’s annual net cash flow from this investment assuming that: a. The interest...

Q: Refer to the facts in problem 6. Now assume that Firm

Refer to the facts in problem 6. Now assume that Firm A borrowed $50,000 to purchase the asset. In each year, it paid $3,800 annual interest on the debt. The interest payments were deductible. a. How...

Q: Hansen Company, a cash basis taxpayer, paid $50,

Hansen Company, a cash basis taxpayer, paid $50,000 for an asset in year 0. Assume it can deduct one-half of the cost in year 0 and the remainder in year 1. Assume a 21 percent tax rate and 8 percent...

Q: In year 0, Jarmex paid $55,000 for an

In year 0, Jarmex paid $55,000 for an overhaul of a tangible operating asset. Jarmex has a 21 percent marginal tax rate and uses a 7 percent discount rate to compute NPV. a. Compute the after-tax cost...

Q: Lento Inc. owned machinery with a $30,000 initial

Lento Inc. owned machinery with a $30,000 initial cost basis. Accumulated book depreciation with respect to the machinery was $12,000, and accumulated tax depreciation was $19,100. Lento sold the mach...

Q: Refer to the facts in the preceding problem. a.

Refer to the facts in the preceding problem. a. Compute the difference between TPW’s book and tax income resulting from the installment sale method. b. Is this difference favorable or unfavorable? c....

Q: In year 1, Maxim sold investment land with a tax basis

In year 1, Maxim sold investment land with a tax basis of $77,000. Payment consisted of $10,000 cash down and the purchaser’s note for $90,000. The note is payable in equal installments of $45,000 in...

Q: In year 1, Aldo sold investment land with a $61

In year 1, Aldo sold investment land with a $61,000 tax basis for $95,000. Payment consisted of $15,000 cash down and the purchaser’s note for $80,000. The note is being paid in 10 annual installments...

Q: Refer to the facts in the preceding problem but assume that Aldo’s

Refer to the facts in the preceding problem but assume that Aldo’s basis in the investment land was $100,000 rather than $61,000. a. Compute Aldo’s recognized loss in year 1. b. In year 4, Aldo pledge...