Questions from Taxation

Q: During a recent IRS audit, the revenue agent decided that the

During a recent IRS audit, the revenue agent decided that the Parker family used their closely held corporation, Falco, to avoid shareholder tax by accumulating earnings beyond the reasonable needs of...

Q: Graham is the sole shareholder of Logan Corporation. For the past

Graham is the sole shareholder of Logan Corporation. For the past five years, Logan has reported little or no taxable income as a result of paying Graham a salary of $500,000 per year. During a recent...

Q: Megan operates a housecleaning business as a sole proprietorship. She oversees

Megan operates a housecleaning business as a sole proprietorship. She oversees a team of 10 cleaning personnel, markets the business, and provides supplies and equipment. The business has been generat...

Q: Mr. and Mrs. Lund and their two children (Ben

Mr. and Mrs. Lund and their two children (Ben and June) are the four equal partners in LBJ Partnership. This year, LBJ generated $36,000 ordinary income. Compute the tax cost for the business if Mr. a...

Q: Mrs. Franklin, who is in the 37 percent tax bracket

Mrs. Franklin, who is in the 37 percent tax bracket, owns a residential apartment building that generates $80,000 annual taxable income. She plans to create a family partnership by giving each of her...

Q: Jurisdiction X levies a flat 14 percent tax on individual income in

Jurisdiction X levies a flat 14 percent tax on individual income in excess of $35,000 per year. Individuals who earn $35,000 or less pay no income tax. a. Mr. Hill earned $98,750 income this year. Com...

Q: Delta Partnership has four equal partners. At the beginning of the

Delta Partnership has four equal partners. At the beginning of the year, Drew was one of the Delta partners, but on October 1, he sold his partnership interest to Cody. If Delta’s ordinary income for...

Q: WRT, a calendar year S corporation, has 100 shares of

WRT, a calendar year S corporation, has 100 shares of outstanding stock. At the beginning of the year, Mr. Wallace owned all 100 shares. On September 30, he gave 25 shares to his brother and 40 shares...

Q: A number of tax and nontax factors should be considered in choosing

A number of tax and nontax factors should be considered in choosing the type of pass through entity through which to operate a new business. For each of the following considerations, indicate whether...

Q: Angela and Thomas are planning to start a new business. Thomas

Angela and Thomas are planning to start a new business. Thomas will invest cash in the business but not be involved in day-to-day operations. Angela plans to work full-time overseeing business operati...