Access the 2017 Form 10-Ks for General Motors, Inc. and Berkshire Hathaway. What was the impact of the Tax Cuts and Jobs Act on their income tax provision for 2017? Why was the impact in opposite directions (i.e., in one case the provision increased and in the other it decreased)?
> Assume AMP Corporation (calendar year end) has 2018 taxable income of $900,000 for purposes of computing the §179 expense. During 2018, AMP acquired the following assets: Asset Placed in Service Basis Machinery September 12 $1,550,000 Compu
> LaMont works for a company in downtown Chicago. The company encourages employees to use public transportation (to save the environment) by providing them with transit passes at a cost of $265 per month. a. If LaMont receives one pass (worth $265) each m
> Tonya Jefferson (single), a sole proprietor, runs a successful lobbying business in Washington, D.C. She doesn’t sell many business assets, but she is planning on retiring and selling her historic townhouse, from which she runs her business, to buy a pla
> On November 10 of year 1 Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,200,000; $300,000 was allocated to the basis of the land and the remaining $900,000 was allocated to
> Way Corporation disposed of the following tangible personal property assets in the current year. Assume that the delivery truck is not a luxury auto. Calculate Way Corporation’s 2018 depreciation deduction (ignore §179 expense and bonus depreciation for
> Lily Tucker (single) owns and operates a bike shop as a sole proprietorship. In 2018, she sells the following long-term assets used in her business: Sales Price Cost Accumulated Depreciation Building $ 230,000 $200,000 $52,000 Equipment 8
> At the beginning of the year, Dee began a calendar-year business and placed in service the following assets during the year: Asset Date Acquired Cost Basis Computer equipment 3/23 $5,000 Furniture 5/12 $7,000 Pickup truck 9/15 $10,000
> What is the qualified business income deduction and how does it affect the tax rate on flow-through entity income?
> Buckley, an individual, began a business two years ago and has never sold a §1231 asset. Buckley owned each of the assets since he began the business. In the current year, Buckley sold the following business assets: Asset Original Cost Accumulated De
> At the beginning of the year, Poplock began a calendar-year dog boarding business called Griff’s Palace. Poplock bought and placed in service the following assets during the year: Asset Date Acquired Cost Basis Computer equipment 3/23 $5,000
> Hart, an individual, bought an asset for $500,000 and has claimed $100,000 of depreciation deductions against the asset. Hart has a marginal tax rate of 32 percent. Answer the questions presented in the following alternative scenarios (assume Hart had no
> Troy (single) purchased a home in Hopkinton, Massachusetts, on January 1, 2007 for $300,000. He sold the home on January 1, 2018 for $320,000. How much gain must Troy recognize on his home sale in each of the following alternative situations? a. Troy ren
> Sarah (single) purchased a home on January 1, 2008 for $600,000. She eventually sold the home for $800,000. What amount of the $200,000 gain on the sale does Sarah recognize in each of the following alternative situations? (Assume accumulated depreciatio
> Brittany started a law practice as a sole proprietor. She owned a computer, printer, desk, and file cabinet she purchased during law school (several years ago) that she is planning to use in her business. What is the depreciable basis that Brittany shoul
> Seiko’s current salary is $85,000. Her marginal tax rate is 32 percent and she fancies European sports cars. She purchases a new auto each year. Seiko is currently a manager for an Idaho Office Supply. Her friend, knowing of her interest in sports cars,
> Lars Osberg, a single taxpayer with a 35 percent marginal tax rate, desires health insurance. The health insurance would cost Lars $8,500 to purchase if he pays for it himself through the health exchange (Lars’s AGI is too high to receive any tax deducti
> Harold and Maude are married and live in a common law state. Neither has made any taxable gifts and Maude owns (holds title) all their property. She dies with a taxable estate of $25 million and leaves it all to Harold. He dies several years later, leavi
> Roberta is considering making annual gifts of $15,000 of stock each to each of her four children. She expects to live another five years and to leave a taxable estate worth approximately $18 million. She requests you justify the gifts by estimating her e
> For flow-through entities with individual owners, how many times is flow-through entity income taxed, who pays the tax, and what is the tax rate?
> Roland had a taxable estate of $15.5 million when he died this year. Calculate the amount of estate tax due (if any) under the following alternatives. a. Roland’s prior taxable gifts consist of a taxable gift of $1 million in 2005. b. Roland’s prior taxa
> Eagle Inc., a U.S. corporation intends to create a limitada (limited liability company) in Brazil in 2018 to manufacture pitching machines. The company expects the operation to generate losses of US$2,500,000 during its first three years of operations. E
> Chapeau Company, a U.S. corporation, operates through a branch in Champagnia. The source rules used by Champagnia are identical to those used by the United States. For 2018, Chapeau has $2,000 of gross income, $1,200 from U.S. sources and $800 from sourc
> Carmen SanDiego, a U.S. citizen, is employed by General Motors Corporation, a U.S. corporation. On April 1, 2018, GM relocated Carmen to its Brazilian operations for the remainder of 2018. Carmen was paid a salary of $120,000 and was employed on a 5-day
> Mackinac Corporation, a U.S. corporation, reported total taxable income of $5 million. Taxable income included $1.5 million of foreign source taxable income from the company’s branch operations in Canada. All of the branch income is foreign branch income
> Use the facts in problem 37. If Guido meets the statutory requirements to be considered a resident of both the United States and Belgium, what criteria does the U.S.-Belgium treaty use to “break the tie” and determine Guido’s country of residence? Look a
> Guido is a citizen and resident of Belgium. He has a full-time job in Belgium and has lived there with his family for the past 10 years. In 2016, Guido came to the United States for the first time. The sole purpose of his trip was business. He intended t
> Use California Publication 1061 (2016) to determine the various tests California uses to determine whether two or more entities are part of a unitary group.
> Kai operates the Surf Shop in Laie, Hawaii, which designs, manufacturers, and customizes surf boards. Hawaii has a hypothetical 4 percent excise tax technically paid by the seller. However, the state also allows "tax on tax" to be charged, which effect
> Marco, Jaclyn, and Carrie formed Daxing Partnership (a calendar-year-end entity) by contributing cash 10 years ago. Each partner owns an equal interest in the partnership. Marco, Jaclyn, and Carrie each have an outside basis in his/her partnership intere
> Is business income allocated from a flow-through entity to its owners self-employment income? Explain.
> At the end of last year, Lisa, a 35 percent partner in the five-person LAMEC Partnership, has an outside basis of $60,000 including her $30,000 share of LAMEC debt. On January 1 of the current year, Lisa sells her partnership interest to MaryLynn for a c
> Rather than purchase BLI directly (as in problems 47 and 48), Amy and Brian will have their corporation, Spartan Tax Services (STS), acquire the business from Ernesto in a tax-deferred Type A merger. Amy and Brian would like Ernesto to continue to run BL
> On August 28, 2017, Mirna Therapeutics, Inc., completed its business combination with Synlogic, Inc. The Form 8-K for Synlogic (NASDAQ ticker SYBX, cik 0001667986) describes the transaction and was filed with the SEC on August 28, 2017. You can access th
> On September 12, 2017, Inotek Pharmaceuticals agreed to acquire Rocket Pharmaceuticals, Ltd., a privately held biopharmaceutical company in a tax-deferred acquisition. The Form 8-K for Inotek (NASDAQ ticker ITEK, cik 0001281895) describes the transaction
> Badger Corporation declared a stock distribution to all shareholders of record on March 25 of this year. Shareholders will receive one share of Badger stock for each ten shares of stock they already own. Madison Cheesehead owns 1,000 shares of Badger sto
> Tiny and Tim each own half of the 100 outstanding shares of Flower Corporation. This year Flower reported taxable income of $6,000. In addition, Flower received $20,000 of life insurance proceeds due to the death of an employee (Flower paid $500 in life
> Beaver Corporation reported taxable income of $500,000 from operations this year. During the year, the company made a distribution of land to its sole shareholder, Eugenia VanDam. The land’s fair market value was $20,000 and its tax and E&P basis to Beav
> Illini Corporation reported taxable income of $500,000 from operations for this year. During the year, the company made a distribution of an automobile to its sole shareholder, Carly Urbana. The auto’s fair market value was $30,000 and its tax basis to I
> Tiger Corporation reported taxable income of $500,000 from operations for this year. During the year, the company made a distribution of land to its sole shareholder, Mike Fairway. The land’s fair market value was $75,000 and its tax and E&P basis to Tig
> Volunteer Corporation reported taxable income of $500,000 from operations for this year. During the year, the company made a distribution of land to its sole shareholder, Rocky Topp. The land’s fair market value was $75,000 and its tax and E&P basis to V
> Doug is considering investing in one of two partnerships. One is located in Canada and one is located in Arizona. Assuming both investments will generate the same before-tax rate of return, which entity should Doug invest in when considering the after-ta
> Paladin, Inc. reported taxable income of $1,000,000 this year and paid federal income taxes of 210,000. The company reported a capital gain from sale of investments of $150,000, which was partially offset by a $100,000 net capital loss carryover from las
> Gator, Inc. reported taxable income of $1,000,000 this year and paid federal income taxes of $210,000. Included in the company’s computation of taxable income is gain from sale of a depreciable asset of $50,000. The income tax basis of the asset was $100
> Boilermaker, Inc. reported taxable income of $500,000 this year and paid federal income taxes of $105,000. Not included in the company’s computation of taxable income is tax-exempt income of $20,000, disallowed meals and entertainment expenses of $30,000
> This year Bobcat Company reports current E&P of negative $300,000 that accrued evenly throughout the year. At the beginning of the year, Bobcat’s accumulated E&P was a $200,000. Bobcat distributed $200,000 to its sole shareholder, Melanie Rushmore, on Ju
> Bulldog Corporation reported taxable income of $500,000 this year before any deduction for any payment to its sole shareholder and employee, Georgia Brown. Bulldog chose to pay a bonus of $100,000 to Georgia at year-end. The bonus meets the requirement
> Gopher Corporation reported taxable income of $500,000 this year. Gopher paid a dividend of $100,000 to its sole shareholder, Sven Anderson The dividend meets the requirements to be a qualified dividend and Sven is subject to a tax rate of 15% on the d
> Randolph Company reported pretax net income from continuing operations of $800,000 and taxable income of $500,000. The book-tax difference of $300,000 was due to a $200,000 favorable temporary difference relating to depreciation, an unfavorable temporary
> What was Alphabet Inc.’s (Google) accounting effective tax rate for 2017? What items caused the company’s accounting effective tax rate to differ from the “hypothetical” tax rate of 35 percent? What was the company’s cash effective tax rate for 2017? Wha
> Burcham Corporation reported pretax book income of $600,000. Tax depreciation exceeded book depreciation by $400,000. In addition, the company received $300,000 of tax-exempt municipal bond interest. The company’s prior-year tax return showed taxable inc
> With recent tax law changes, are taxpayers likely to receive more or less tax savings from home mortgage interest deductions?
> Ann Corporation reported pretax book income of $1,000,000. Included in the computation were favorable temporary differences of $200,000, unfavorable temporary differences of $50,000, and favorable permanent differences of $100,000. Compute the company’s
> Harrison Corporation reported pretax book income of $600,000. Tax depreciation exceeded book depreciation by $400,000. In addition, the company received $300,000 of tax-exempt municipal bond interest. The company’s prior year tax return showed taxable in
> Shaw, Inc. reported pretax book income of $10,000,000. During the current year, the reserve for bad debts increased by $100,000. In addition, tax depreciation exceeded book depreciation by $200,000. Shaw, Inc. sold a fixed asset and reported book gain of
> Shaw Corporation reported pretax book income of $1,000,000. Included in the computation were favorable temporary differences of $200,000, unfavorable temporary differences of $50,000, and favorable permanent differences of $100,000. Compute the company’s
> Chandler Corporation reported pretax book income of $2,000,000. Tax depreciation exceeded book depreciation by $500,000. During the year the Company capitalized $250,000 into ending inventory under §263A. Capitalized inventory costs of $150,000 in beginn
> Assume that in 2018 Hill Corporation reported a net operating loss of $10,000 that it carried forward to year 2019. In 2018, Hill also reported a net capital loss of $3,000 that it carried forward to 2019. In 2019, ignoring any carryovers from other year
> ELS corporation is about to begin its sixth year of existence. Assume that ELS reported gross receipts for each of its first five years of existence for scenarios A, B, and C as follows: Year of Existence Scenario A Scenario B Scenario C 1 $20
> ATW corporation currently uses the FIFO method of accounting for its inventory for book and tax purposes. Its beginning inventory for the current year was $8,000,000. Its ending inventory for the current year was $7,000,000. If ATW had been using the LIF
> Danni is a single 30 percent owner of Kolt (a business entity). In the current year, Kolt reported a $1,000,000 business loss. Answer the following questions associated with each of the following alternative scenarios: a. Kolt is organized as a C corpora
> Mackenzie is considering conducting her business, Mac561, as either a single member LLC or as an S corporation. Determine Mackenzie’s after-tax cash flow from the entity’s business income and any compensation she receives from the business assuming her m
> Is it possible for a taxpayer to have more than one loan that is treated as acquisition indebtedness for tax purposes? Explain.
> After several years of profitable operations, Javell, the sole shareholder of JBD Inc., a C corporation, sold 22 percent of her JBD stock to ZNO Inc., a C corporation in a similar industry. During the current year JBD reports $1,000,000 of after-tax inco
> Marathon Inc. (a C corporation) reported $1,000,000 of taxable income in the current year. During the year it distributed $100,000 as dividends to its shareholders as follows: • $5,000 to Guy, a 5% individual shareholder. • $15,000 to Little Rock Corp.,
> Amanda would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 8 percent annual before-tax return on a $500,000 investment. Amanda’s marginal income tax rate i
> Amanda would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 8 percent annual before-tax return on a $500,000 investment. Amanda’s marginal income tax rate i
> Jacob is a member of WCC (an LLC taxed as a partnership). Jacob was allocated $100,000 of business income from WCC for the year. Jacob’s marginal income tax rate is 37 percent. The business allocation is subject to 2.9 percent of self-employment tax and
> Andrea would like to organize SHO as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 11 percent annual before-tax return on a $200,000 investment. Andrea’s marginal income tax rate
> Jesse Brimhall is single. In 2018, his itemized deductions were $9,000 before considering any real property taxes he paid during the year. Jesse’s adjusted gross income was $70,000 (also before considering any property tax deductions). In 2018, he paid r
> Peter and Shaline Johnsen moved into a home in a new subdivision. Theirs was one of the first homes in the subdivision. During the year, they paid $1,500 in real property taxes on the home to the state government, $500 to the developer of the subdivision
> On January 1 of 2018, Jason and Jill Marsh acquired a home for $500,000 by paying $400,000 down and borrowing $100,000 with a 7 percent loan secured by the home. On January 1, 2019, the Marshes needed cash so they refinanced the original loan by taking o
> What risks do employees making an 83(b) election on a restricted stock grant assume?
> For tax purposes, does a residence need to be situated at a fixed location? Explain.
> What is the relationship between the balance of payments and a fixed or floating exchange rate regime?
> Identify the correct BOP account for each of the following transactions. a. A German based pension fund buys U.S. government 30-year bonds for its investment portfolio. b. Scandinavian Airlines System (SAS) buys jet fuel at Newark Airport for its flight
> In recent years emerging market MNEs have improved their corporate governance policies and become more shareholder-friendly. What do you think is driving this phenomenon?
> It has been claimed that failures in corporate governance have hampered the growth and profitability of some prominent firms located in emerging markets. What are some typical causes of these failures in corporate governance?
> Why are cross currency rates of special interest when discussing intermarket arbitrage?
> Define base currency, unit currency, price currency, and quote currency.
> Define and give an example of the following: a. Direct quote between the U.S. dollar and the Mexican peso, where the United States is designated as the home country. b. Indirect quote between the Japanese yen and the Chinese renminbi (yuan), where China
> With reference to interbank quotations, what is the difference between American terms and European terms?
> Answer the following: a. What is the geographical location of the foreign exchange market? b. What are the two main types of trading systems for foreign exchange? c. How are foreign exchange markets connected for trading activities?
> Convert the following indirect quotes to direct quotes and direct quotes to indirect quotes: a. Euro: €1.22/$ (indirect quote) b. Russia: Rbl30/$ (indirect quote) c. Denmark: $0.1644/DKr (direct quote)
> How should an MNE factor host country inflation into its evaluation of an investment proposal?
> Define the following terms: a. Foreign exchange market. b. Foreign exchange transaction. c. Foreign exchange.
> Are dividends really all that important to investors in publicly traded companies? Aren't capital gains really the point or objective of the investor?
> How do shareholders in a publicly traded firm actually reap cash flow returns from their ownership? Who has control over which of these returns?
> What should be the primary operational goal of an MNE?
> Do shareholder wealth maximization and stakeholder capitalism have the same time-horizon for the strategic, managerial, and financial objectives of the firm? How do they differ?
> Explain the assumptions and objectives of the stakeholder capitalization model.
> Explain the assumptions and objectives of the shareholder wealth maximization model.
> Why is this separation so critical to the understanding of how businesses are structured and led?
> How does ownership alter the control of a business organization? Is the control of a private firm that different from a publicly traded company?
> What alternative actions can shareholders take if they are dissatisfied with their company?
> In the evaluation of a potential foreign investment, how should a multinational firm evaluate cash flows in the host foreign country that are blocked from being repatriated to the firm's home country?
> What are the main summary statements of the balance of payments accounts and what do they measure?
> What are the primary drivers of corporate governance across the globe? Is the relative weight or importance of some drivers increasing over others?
> What are the four major types of governance regimes and how do they differ?
> Define corporate governance and the various stakeholders involved in corporate governance. What is the difference between internal and external governance?
> What is a hybrid? How may it be managed differently?
