Questions from Taxation

Q: On March 1, 2018, Eve and Frank each contributed $

On March 1, 2018, Eve and Frank each contributed $30,000 cash to the newly formed EF Partnership in exchange for a 50 percent general interest. The partnership immediately borrowed $50,000 from an unr...

Q: In the current year (year 0), Amisha became a shareholder

In the current year (year 0), Amisha became a shareholder in Sultan Inc., a calendar year S corporation, by contributing $15,000 cash in exchange for stock. Shortly before the end of the year, Sultan’...

Q: Marla recently inherited $50,000 and is considering two alternatives

Marla recently inherited $50,000 and is considering two alternatives for investing these funds. Investment A is stock of a C corporation, expected to pay annual dividends of 8 percent. Investment B is...

Q: In 2017, AS, an accrual basis corporation, contracted with

In 2017, AS, an accrual basis corporation, contracted with a nationally prominent artist to paint a mural in the lobby of the new corporate headquarters under construction. The artist’s commission was...

Q: Congress recently enacted a nonrefundable credit based on the cost of qualifying

Congress recently enacted a nonrefundable credit based on the cost of qualifying alcohol and drug abuse counseling programs provided by any corporate employer to its employees. The credit is limited t...

Q: A&Z Inc. averages $4 million taxable income a

A&Z Inc. averages $4 million taxable income a year. Because it needs an infusion of cash, the board of directors is considering two options: selling a new issue of preferred stock to the public for a...

Q: Mr. and Mrs. Tinker own a sizeable investment portfolio of

Mr. and Mrs. Tinker own a sizeable investment portfolio of stock in publicly held corporations. The couple has four children—ages 20, 22, 25, and 27—with whom they want to share their wealth. Unfortun...

Q: Agatha is planning to start a new business venture and must decide

Agatha is planning to start a new business venture and must decide whether to operate as a sole proprietorship or incorporate. She projects that the business will generate annual cash flow and taxable...

Q: Mr. Young operates a photography studio as a sole proprietorship.

Mr. Young operates a photography studio as a sole proprietorship. His average annual income from the business is $100,000. Because Mr. Young does not need the entire cash flow for personal consumption...

Q: Lydell Corporation currently operates in two states, P and Q.

Lydell Corporation currently operates in two states, P and Q. State P has a 5 percent tax rate and uses an equally weighted three-factor apportionment formula. State Q has a 9 percent tax rate and use...