Draft a short speech that you will give to your university’s Business Club. The title of your talk is “What Is Worldwide Taxation and How Can I Avoid It?” Be certain to include the term territorial taxing system in your presentation.
> Continue with the facts of Problem 44. What are the Federal income tax withholding requirements with respect to Martinho’s sale? Who pays the withheld amount to the U.S. Treasury? Facts from Problem 44 Martinho is a citizen of Brazil and lives there yea
> John McPherson is single, an attorney, and a U.S. citizen. He recently attended a seminar where he learned he could give up his U.S. citizenship, move to Bermuda (where he would pay no income tax), and operate his law practice long distance via the inter
> Trace, Ltd., an Allegro corporation, operates a trade or business in the United States. Trace’s U.S.-source income effectively connected with this trade or business is $800,000 for the current year. Trace’s current-year E & P is $600,000. Trace’s net U.S
> When Padgett Properties LLC was formed, Nova contributed land (value of $200,000 and basis of $50,000) and $100,000 cash, and Oscar contributed cash of $300,000. Both members received a 50% interest in LLC profits and capital. a. How is the land recorded
> Abby Wang recently became the treasurer of First Point Church. The church has existed for three years and never has filed any documents with the IRS. a. Identify any Federal income tax reporting responsibilities that Abby might have as church treasurer.
> Wonderful Wilderness, Inc., is a tax-exempt organization. Its mission is to “explore, enjoy, and protect the wild places of the earth; practice and promote the responsible use of the earth’s ecosystems and resources; educate and enlist humanity to protec
> Gray, Inc., a private foundation, reports the following items of income and deductions. Gray is not eligible for the 1% tax rate on net investment income. Interest income……………………………………………………….$ 29,000 Rent income……………………………………………………………….61,000 Dividend
> Burgundy, Inc., and Violet are equal partners in the calendar year BV LLC. Burgundy uses a fiscal year ending April 30, and Violet uses a calendar year. Burgundy receives an annual guaranteed payment of $100,000 for use of capital contributed by Burgundy
> Define the following with respect to unrelated business income from debt financed property. a. Debt-financed income. b. Debt-financed property. c. Acquisition indebtedness.
> Pigeon, Inc., a § 501(c)(3) organization, received support from the following sources. Governmental unit A for services rendered…………………………………………….$ 6,300 Governmental unit B for services rendered……………………………………………….4,500 Fees from the general pub
> Initiate, Inc., a § 501(c)(3) organization, receives the following revenues and incurs the following expenses. Grant from Gates Foundation……………………………………………………$ 70,000 Charitable contributions received………………………………………………..625,000 Expenses in carrying out
> Chang Corporation is part of a three-corporation unitary business. The group has a water’s edge election in effect with respect to unitary State Q. State B does not apply the unitary concept with respect to its corporate income tax laws
> Save, Inc., an exempt organization, sells the following assets during the tax year. Determine the effect of these transactions on Save’s unrelated business taxable income. Asset Gain (Loss) Use Land and building $100,000 In exempt
> Assume the same facts as in Problem 40, with the following exceptions: • Reece purchased the land five years ago for $120,000. Its fair market value was $90,000 when it was contributed to the LLC. • A few years later,
> Kim Corporation, a calendar year taxpayer, operates manufacturing facilities in States A and B. A summary of Kim’s property holdings follows. Determine Kim’s property factors for the two states. The statutes of both
> Paul and Anna plan to form the PA LLC by the end of the current year to produce and sell specialty athletic apparel. Paul and Anna will both serve as member-managers of the LLC and will be active in its operations. The members will each contribute $80,00
> USCo owns 65% of the voting stock of LandCo, a Country X corporation. Terra, an unrelated Country Y corporation, owns the other 35% of LandCo. LandCo owns 100% of the voting stock of OceanCo, a Country Z corporation. Assuming that USCo is a U.S. sharehol
> Money, Inc., a U.S. corporation, has $500,000 to invest overseas. For U.S. tax purposes, any additional gross income earned by Money will be taxed at 34%. Two possibilities for investment are: a. Invest the $500,000 in common stock of Exco (a foreign cor
> This year, Callie and Neil formed the equally owned CN LLC. Callie contributed $300,000 of cash and Neil contributed real estate valued at $450,000 (basis of $100,000). The property was subject to a nonrecourse liability of $150,000 that was assumed by t
> Suzy contributed assets valued at $360,000 (basis of $200,000) in exchange for her 40% interest in Suz-Anna GP (a general partnership). Anna contributed land and a building valued at $640,000 (basis of $380,000) in exchange for the remaining 60% interest
> As the director of the multistate tax planning department of a consulting firm, you are developing a brochure to highlight the services it can provide. Part of the brochure is a list of five or so key techniques that clients can use to reduce state incom
> What types of expenditures might a new partnership incur? How are those costs treated for Federal tax purposes? Create a chart describing the expenditure, the treatment, and the Code section requiring this treatment.
> How does a partnership calculate depreciation on property that is contributed by a partner? If the partnership incurs additional costs that must be capitalized (i.e., transfer taxes related to changing the title), how are those costs treated?
> On January 2 of the current year, Fenton and Myers form the FM LLC. Their contributions to the LLC are as follows: Within 30 days of formation, FM collects the receivables and sells the inventory for $60,000 cash. How much income does FM recognize from
> Compare the provision for the non-recognition of gain or loss on contributions to a partnership (i.e., § 721) with the similar provision related to corporate formation (i.e., § 351). What are the major differences and similarities?
> State E applies a throwback rule to sales, while State F does not. State G has not adopted an income tax to date. Clay Corporation, headquartered in E, reported the following sales for the year. All of the goods were shipped from Clay’s
> Describe how a partnership reports its income for tax purposes. Who makes most elections related to partnership income and deductions? What theory underlies this treatment?
> Wellness, Inc., a § 501(c)(3) organization, makes lobbying expenditures of $340,000 this year. Exempt purpose expenditures were $600,000 for the first six months of the year and $950,000 for the last six months of the year. Determine the Federal income t
> For each of the following organizations, determine its UBTI and any related UBIT. a. AIDS, Inc., an exempt charitable organization that provides support for individuals with AIDS, operates a retail medical supply store open to the general public. The net
> ABC, Inc., a domestic corporation, reports $50 million of taxable income, including $15 million of general limitation foreign-source taxable income, on which ABC paid $5 million in foreign income taxes. The U.S. tax rate is 35%. What is ABC’s foreign tax
> Create a PowerPoint outline describing the major exemptions and exclusions from the sales/use tax base of most states. Use your slides to discuss this topic with your accounting students’ club.
> Quinn Corporation is subject to tax in States G, H, and I. Quinn’s compensation expense includes the following. Officers’ salaries are included in the payroll factor for G and I, but not for H. Compute Quinnâ&#
> A subsidiary corporation is liquidated under § 332. Pursuant to its liquidation, the subsidiary distributed property to a minority shareholder. With respect to this distribution, what are the tax consequences to the subsidiary corporation and to the mino
> Assume the same facts as in Problem 48, except that Suz-Anna was formed as an LLC instead of a general partnership. Facts from Problem 48, Suzy contributed assets valued at $360,000 (basis of $200,000) in exchange for her 40% interest in Suz-Anna GP (a
> Assume the same facts as in Problem 48, and assume that Suz-Anna prepares the capital account roll forward on the partners’ Schedules K–1 on a tax basis. Facts from Problem 48 Suzy contributed assets valued at $360,000 (basis of $200,000) in exchange fo
> True Corporation, a wholly owned subsidiary of Trumaine Corporation, generated a $400,000 taxable loss in its first year of operations. True’s activities and sales are restricted to State A, which imposes an 8% income tax. In the same y
> Discuss the tax consequences to the parent corporation in a § 332 liquidation of a subsidiary.
> Your client, Rich N. Ready, has come to you for advice. Rich is interested in many social welfare issues (e.g., access to higher education, welfare reform, and abortion rights). He wishes to use his wealth to educate the general public on these issues, a
> BlueCo, a domestic corporation, incorporates GreenCo, a new wholly owned entity in Germany. Under both German and U.S. legal principles, this entity is a corporation. BlueCo faces a 35% U.S. tax rate. GreenCo earns $1,500,000 in net profits from its Germ
> Emma, a U.S. resident, received the following income items for the current tax year. Identify the sourcing of each income item as either U.S. or foreign. a. $600 interest from a savings account at a Florida bank. b. $5,000 dividend from U.S. Flower Comp
> Hart Enterprises, a U.S. corporation, owns 100% of OK, Ltd., an Irish corporation. OK’s gross income for the year is $10 million. Determine OK’s Subpart F income (before any expenses) from the transactions that it reported this year. a. OK received $600
> Perch, Inc., an exempt organization, records unrelated business taxable income of $4 million. a. Calculate Perch’s UBIT. b. Prepare an outline of a presentation you are going to give to the new members of Perch’s board on why Perch is subject to the UBIT
> Packard, Inc., a domestic corporation, operates a branch in Mexico. Over the last 10 years, this branch has generated $30 million in losses. For the last 3 years, however, the branch has been profitable and has earned enough income to entirely offset the
> “U.S. persons are taxed on their worldwide income.” Explain.
> HiramCo, a U.S. entity, operates a manufacturing business in both Mexico and Costa Rica, and it holds its investment portfolio in Sweden. How many foreign tax credit computations must HiramCo make? Be specific, and use the term basket in your answer.
> Teal, Inc., a foreign corporation, pays a dividend to its shareholders on November 30. Red, Inc., a U.S. corporation and 7% shareholder in Teal, receives a dividend of 10,000K (a foreign currency). Pertinent exchange rates are as follows. November 30………
> Molly, Inc., a domestic corporation, owns 15% of PJ, Inc., and 12% of Emma, Inc., both foreign corporations. Molly is paid gross dividends of $35,000 and $18,000 from PJ and Emma, respectively. PJ withheld and paid more than $10,500 in foreign taxes on t
> QuinnCo could not claim all of the income taxes it paid to Japan as a foreign tax credit (FTC) this year. What computational limit probably kept QuinnCo from taking its full FTC? Explain.
> Liang, a U.S. citizen, owns 100% of ForCo, a foreign corporation not engaged in a U.S. trade or business. Is Liang subject to any U.S. income tax on her dealings with ForCo? Explain.
> The stock of Mulberry Corporation is owned by Archana (60%) and Anar (40%), who are mother and daughter. Pursuant to a plan of complete liquidation adopted earlier in the current year, Mulberry distributes land worth $575,000 to Anar (basis of $100,000 i
> Castle Corporation conducts business in States 1, 2, and 3. Castle’s $630,000 taxable income consists of $555,000 apportionable income and $75,000 allocable income generated from transactions conducted in State 3. Castle’s sales, property, and payroll ar
> What is a guaranteed payment? How is it reported on Form 1065 and its various schedules? How is it reported to and by the partner?
> Write a memo for the tax research file on the difference between “inbound” and “outbound” activities in the context of U.S. taxation of international income.
> Sunset, Inc., a § 501(c)(3) exempt organization that is classified as a private foundation, generates investment income of $500,000 for the current tax year. This amount represents 18% of Sunset’s total income. a. What type of tax is imposed on Sunset as
> Five unrelated U.S. individuals own all of the shares of Popping, a corporation organized in the United States but operating fully in the country Vivace. Mariam, one of the shareholders, asks you whether the income from Popping will be taxed to her immed
> Joy Marcus owns several income-producing assets, including a stock portfolio and a small services proprietorship. She wants to start up a new corporation in the country Molto, where the income tax rates are about one-third of those in the United States,
> Randall operates his distribution business in several countries. He wants to move some equipment to a new office in South Africa. This equipment includes assets with a large acquisition price and accumulated MACRS depreciation. The assets to be transferr
> Honk, Inc., a U.S. corporation, purchases weight-lifting equipment for resale from HiDisu, a Japanese corporation, for 60 million yen. On the date of purchase, 105 yen is equal to $1 U.S. (¥105:$1). The purchase is made on December 15, 2016, with payment
> Indeco, a U.S. C corporation, operates Grange, a sales branch in Staccato. Indeco’s U.S. corporate marginal tax rate is 35%; it is 20% for Staccato. Grange’s pre-tax profit for the year is $1 million. There is no incom
> Klein, a domestic corporation, receives a $10,000 dividend from ForCo, a wholly owned foreign corporation. The deemed-paid FTC associated with this dividend is $3,000. What is the total gross income included in Klein’s tax return as a result of this divi
> Cordeio, Inc., is a CFC for the entire tax year (not a leap year). Vancy Company, a U.S. corporation, owns 75% of Cordeio’s one class of stock for the entire year. Subpart F income is $450,000, and no distributions have been made during the year. Both en
> Shonda receives dividend income from the following foreign and domestic corporations in the current tax year. Determine the amount of U.S.-sourced income for each corporation. Percentage of U.S. Income for Past 3 Years Dividends Corporation Receive
> When can a partnership use the cash method of accounting?
> Tom is the treasurer of the City Garden Club, a new entity in the community. A friend who is the treasurer of the garden club in a neighboring community tells Tom that it is not necessary for City Garden Club to file a request for exempt status with the
> Velocity, Inc., a foreign corporation, operates a U.S. branch. It reports the following tax results and other information for the year. Pretax earnings effectively connected with a U.S. trade or business………$900,000 U.S. corporate tax (at 34%)……………………………
> Enders, Inc., a domestic corporation that invests in foreign securities, reports total taxable income for the tax year of $290,000, consisting of $208,800 in U.S.-source business profits and $81,200 of income from foreign sources. Foreign taxes of $24,00
> Use Exhibit 24.1 to provide the required information for Warbler Corporation, whose Federal taxable income totals $10 million. Warbler apportions 70% of its manufacturing income to State C. Warbler generates $4 million of nonapportionable income each yea
> Pursuant to a complete liquidation, Oriole Corporation distributes to its shareholders land held for three years as an investment (adjusted basis of $250,000, fair market value of $490,000). The land is subject to a liability of $520,000. a. What are the
> Although private foundations generally are exempt from Federal income tax, they may be subject to two types of certain excise taxes. Identify these taxes, and discuss why they are imposed on private foundations.
> Dread Corporation operates in a high-tax state. The firm asks you for advice on a plan to outsource administrative work done in its home state to independent contractors. This work now costs the company $750,000 in wages and benefits. Dread’s total payro
> Indicate for each transaction whether a sales (S) or use (U) tax applies or whether the transaction is nontaxable (N). Where the laws vary among states, assume that the most common rules apply. All taxpayers are individuals. a. A resident of State A purc
> Create, Inc., produces inventory in its foreign manufacturing plants for sale in the United States. Its foreign manufacturing assets have a tax book value of $5 million and a fair market value of $15 million. Its assets related to the sales activity have
> Assume the same facts as in Problem 31, except that A uses a single-factor apportionment formula that consists solely of sales and B uses a three-factor apportionment formula that equally weights sales, property (at historical cost), and payroll. State B
> When Bruno’s basis in his LLC interest is $150,000, he receives cash of $55,000, a proportionate share of inventory, and land in a distribution that liquidates both the LLC and his entire LLC interest. The inventory has a basis to the LLC of $45,000 and
> Sweeney originally contributed $175,000 in cash for a one-fourth interest in the Gilbert LLC. During the several years that Sweeney was a member of the LLC, his share of the LLC’s income was $90,000 and he withdrew $75,000 cash. The LLC’s liabilities are
> Shelly Zumaya (2220 East Hennepin Avenue, Minneapolis, MN 55413) is the president and sole shareholder of Kiwi Corporation (stock basis of $400,000). Incorporated in 2006, Kiwi Corporation’s sole business has consisted of the purchase and resale of used
> Megan is an accountant for KnoxCo. She is a telecommuter and works most days from her home in Tennessee. Twice a month, she travels to Georgia for a staff meeting at the employer’s Atlanta headquarters. In which state’s payroll factor should Megan’s comp
> Explain the tax consequences to a shareholder of a corporation in the process of liquidation under the general rule of § 331.
> Paloma purchased all of the outstanding Dove stock six years ago. Dove has prospered under Paloma’s direction, and now Hawk Corporation is interested in acquiring Dove, but not directly. Hawk forms a new subsidiary, called Starling, whose purpose is to m
> Target Corporation holds assets with a fair market value of $4 million (adjusted basis of $2.2 million) and liabilities of $1.5 million. It transfers assets worth $3.7 million to Acquiring Corporation in a “Type C” reorganization, in exchange for Acquiri
> Jed acquired 25% of the stock of Alpha (basis of $100,000) 12 years ago, and the other 75% was purchased by Zia (basis of $400,000) three years ago. Alpha enters into a tax-free consolidation with Beta, in which Jed will receive an 8% interest in the new
> Quail Corporation was created six years ago through contributions from Kasha ($900,000) and Frank ($100,000). In a transaction qualifying as a reorganization, Quail exchanges all of its assets currently valued at $1.8 million (basis of $1.2 million) for
> The Open Museum is an exempt organization that operates a gift shop. The museum’s annual operations budget is $3.2 million. Gift shop sales generate a profit of $900,000. Another $600,000 of investment income is generated by the museum’s endowment fund.
> On April 27, 2017, Auk Corporation acquires 100% of the outstanding stock of Amazon Corporation (E & P of $750,000) for $1.2 million. Amazon Corporation has assets with a fair market value of $1.4 million (basis of $800,000), no liabilities, and no loss
> Warwick, Inc., a U.S. corporation, owns 100% of NewGrass, Ltd., a foreign corporation. NewGrass earns only general limitation income. During the current year, NewGrass paid Warwick a $10,000 dividend. The deemed-paid foreign tax credit associated with th
> On July 22, 2016, Lilac Corporation purchased 25% of the Coffee Corporation stock outstanding. Lilac Corporation purchased an additional 40% of the stock in Coffee on March 24, 2017, and an additional 20% on May 2, 2017. On September 25, 2017, Lilac Corp
> Orange Corporation purchased bonds (basis of $350,000) of its wholly owned subsidiary, Green Corporation, at a discount. Upon liquidation of Green pursuant to § 332, Orange receives payment in the form of land worth $400,000, the face amount of the bonds
> The trend in state income taxation is to move to an apportionment formula that places extra weight on the sales factor. Many states now use sales-factor- only apportionment. Explain why this development is attractive to the taxing states.
> The stock in Ivory Corporation is owned by Gold Corporation (80%) and Imelda (20%). Gold Corporation purchased its shares in Ivory nine years ago at a cost of $650,000, and Imelda purchased her shares in Ivory four years ago at a cost of $175,000. Ivory
> The stock of Magenta Corporation is owned by Fuchsia Corporation (95%) and Marta (5%). Magenta is liquidated in the current year, pursuant to a plan of liquidation adopted earlier in the year. In the liquidation, Magenta distributes various assets worth
> Pursuant to a complete liquidation in the current year, Scarlet Corporation distributes to Jake land (basis of $425,000, fair market value of $390,000) that was purchased three years ago and held as an investment. The land is subject to a liability of $2
> For the built-in loss limitation to apply, the property must have been acquired by the corporation as part of a plan whose principal purpose was to recognize a loss on the property by the liquidating corporation. Explain.
> Polly Ling is a successful professional golfer. She is a resident of a country that does not have a tax treaty with the United States. Ling plays matches around the world, about one-half of which are in the United States. Ling’s reputation is without ble
> Jerry Jeff Keen, the CFO of Boots Unlimited, a Texas corporation, has come to you regarding a potential restructuring of business operations. Boots has long manufactured its western boots in plants in Texas and Oklahoma. Recently, Boots has explored the
> Willa, a U.S. corporation, owns the rights to a patent related to a medical device. Willa licenses the rights to use the patent to IrishCo, which uses the patent in its manufacturing facility located in Ireland. What is the sourcing of the $1 million roy
> The board of directors of White Pearl, Inc., a private foundation, consists of Charlyne, Beth, and Carlos. They vote unanimously to provide a $500,000 grant to Carlos. The grant is to be used for travel and education and does not qualify as a permitted g
> Elmwood, Inc., a domestic corporation, owns 15% of Correy, Ltd., a Hong Kong corporation. The remaining 85% of Correy is owned by Fortune Enterprises, a Canadian corporation. At the end of the current year, Correy has $400,000 in undistributed E & P and
> Chock, a U.S. corporation, purchases inventory for resale from distributors within the United States and resells this inventory at a $1 million profit to customers outside the United States. Title to the goods passes outside the United States. What is th
> Regarding the apportionment formula used to compute state taxable income, does each of the following independent characterizations describe a taxpayer that likely is based in state or out of state? Explain. a. The sales factor is positively correlated wi
> For purposes of the related-party loss limitation within the context of a complete liquidation of a corporation, what is the definition of disqualified property?
