Questions from Taxation

Q: Company DL must choose between two business opportunities. Opportunity 1 will

Company DL must choose between two business opportunities. Opportunity 1 will generate $14,000 before-tax cash in years 0 through 3. The annual tax cost of Opportunity 1 is $2,500 in years 0 and 1 and...

Q: On January 1, 2017, Leo paid $15,000

On January 1, 2017, Leo paid $15,000 for 5 percent of the stock in BLS, an S corporation. In November, he loaned $8,000 to BLS in return for a promissory note. BLS generated a $600,000 operating loss...

Q: Refer to the facts in the preceding problem. BLS generated $

Refer to the facts in the preceding problem. BLS generated $408,000 ordinary business income in 2018. a. How much of Leo’s share of this income is included in his 2018 taxable income? b. Compute Leo’s...

Q: Colin, a self-employed consultant, uses a room of

Colin, a self-employed consultant, uses a room of his home as a business office. This room represents 10 percent of the home’s square footage. This year, Colin incurred the following expenses in conne...

Q: For each of the following situations, indicate whether the corporation is

For each of the following situations, indicate whether the corporation is eligible to elect S corporation status. a. Carman Corporation has two shareholders, Carla and Manuel. Carla is a United States...

Q: Wanda is a 20 percent owner of Video Associates, which is

Wanda is a 20 percent owner of Video Associates, which is treated as a pass through entity for federal income tax purposes. This year, Wanda was allocated $45,000 of ordinary income from Video Associa...

Q: Evan is the sole shareholder of Magic Roofing Company, a calendar

Evan is the sole shareholder of Magic Roofing Company, a calendar year S corporation. Although Evan spends at least 30 hours per week supervising Magic’s employees, he has never drawn a salary from Ma...

Q: Calculate the total Social Security and Medicare tax burden on a sole

Calculate the total Social Security and Medicare tax burden on a sole proprietorship earning 2018 profit of $300,000, assuming a single sole proprietor.

Q: Mrs. Singer owns a profitable sole proprietorship. For each of

Mrs. Singer owns a profitable sole proprietorship. For each of the following cases, use a Schedule SE, Form 1040, to compute her 2017 self-employment tax and her income tax deduction for such tax. a....

Q: In 2018, Wilma Way’s sole proprietorship, WW Bookstore, generated

In 2018, Wilma Way’s sole proprietorship, WW Bookstore, generated $120,000 net profit. In addition, Wilma recognized a $17,000 gain on the sale of business furniture and shelving, all of which was rec...