Question: Your client, Midwest Products Inc. (MPI), is
Your client, Midwest Products Inc. (MPI), is a closely held, calendar-year, accrual-method corporation located in Fowlerville, Michigan. MPI has two operating divisions. One division manufactures lawn and garden furniture and decorative objects (furniture division), while the other division manufactures garden tools and hardware (tool division). MPI’s single class of voting common stock is owned as follows:
The three shareholders are unrelated.
Outdoor Living Company (OLC), a publicly held, calendar-year corporation doing business in several midwestern states, has approached MPI about acquiring its furniture division. OLC has no interest in acquiring the tool division, however. OLC’s management has several strong business reasons for the acquisition, the most important of which is to expand the company’s market into Michigan. Iris, Rose, and Lily are amenable to the acquisition provided it can be accomplished in a tax-deferred manner.
OLC has proposed the following transaction for acquiring MPI’s furniture division. On April 30 of this year, OLC will create a 100-percent owned subsidiary, OLC Acquisition Inc. (OLC-A). OLC will transfer to the subsidiary 60,000 shares of OLC voting common stock and $2,000,000. The current fair market value of the OLC voting stock is $50 per share ($3,000,000 in total). Each of the three MPI shareholders will receive a pro rata amount of OLC stock and cash.
As part of the agreement, MPI will sell the tool division before the acquisition, after which MPI will merge into OLC-A under Michigan and Ohio state laws (a forward triangular Type A merger). Pursuant to the merger agreement, OLC-A will acquire all of MPI’s assets, including 100 percent of the cash received from the sale of the tool division ($2,000,000), and will assume all of MPI’s liabilities. The cash from the sale of the tool division will be used to modernize and upgrade much of the furniture division’s production facilities. OLC’s management is convinced that the cash infusion, coupled with new management, will make MPI’s furniture business profitable. OLC management has no plans to liquidate OLC-A into OLC at any time subsequent to the merger. After the merger, OLC-A will be renamed Michigan Garden Furniture Inc.
a) Determine whether the proposed transaction meets the requirements to qualify as a tax-deferred forward triangular Type A merger. Consult Rev. Rul. 88-48 and Rev. Rul. 2001-25 in thinking about the premerger sale of the tool division assets.
b) Could the proposed transaction qualify as a reverse triangular Type A merger if OLC-A merged into MPI? If not, how would the transaction have to be restructured to meet the requirements to be a reverse triangular merger?
> Consider the function f(x) = sin βx, where β is a constant. Find the first-, second-, third-, and fourth-order derivatives of the function. Verify that the function and its second derivative satisfy the equation f″(x) + β2 f(x) = 0. Use the results of pa
> The value V of a machine t years after it is purchased is inversely proportional to the square root of t + 1. The initial value of the machine is $10,000. Write V as a function of t. Find the rate of depreciation when t = 1. Find the rate of depreciation
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> The cost C (in dollars) of producing x units of a product is C = 60x + 1350. For one week, management determined that the number of units produced x at the end of t hours can be modeled by x = -1.6t3 + 19t2 – 0.5 t – 1
> The normal daily maximum temperatures T (in degrees Fahrenheit) for Chicago, Illinois, are shown in the table. Use a graphing utility to plot the data and find a model for the data of the form T(t) = a + b sin(ct - d) where T is the temperature and t is
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> The displacement from equilibrium of an object in harmonic motion on the end of a spring is /
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> The graphs of f and g are shown. Let h(x) = f (g(x)) and s(x) = g( f (x)). Find each derivative, if it exists. If the derivative does not exist, explain why. Find h’ (3) Find s’ (9)
> y = 5(2 – x3)4 Find the derivative of the function.
> Describe the Chain Rule for the composition of two differentiable functions in your own words.
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> Winkin, Blinkin, and Nod are equal shareholders in SleepEZ, an S corporation. In the conditions listed below, how much income should each report from SleepEZ for 2019 under both the daily allocation and the specific identification allocation method? Refe
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> Cathy, Heathcliff, and Isabelle are equal shareholders in Wuthering Heights (WH), an S corporation. Heathcliff has decided he would like to terminate the S election. In the following alternative scenarios, indicate whether the termination will occur and
> What tax benefits does the buyer hope to obtain by making a §338 or §338(h)(10) election? Describe how this election might affect the value offered for the target corporation.
> Describe the three hurdles a taxpayer must pass if he wants to deduct a loss from his share in an S corporation. What other loss limitation rule may impact the deductibility of losses from an S corporation?
> Describe the advantages (if any) of using a reverse triangular form of Type A reorganization in acquiring other corporations.
> Lauren is 17 years old. She reports earned income of $3,000 and unearned income of $6,200. Is it likely that she is subject to the kiddie tax? Explain.
> Gerry (age 56) and Elaine (age 54) have been married for 12 years and file a joint tax return. The couple lives in an apartment in downtown Manhattan. Gerry’s father, Mortey, recently retired from Del Boca Vista Corporation (DBVC), where he worked for ma
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> Abigail, Bobby, and Claudia are equal owners in Lafter, an S corporation that was a C corporation several years ago. While Abigail and Bobby actively participate in running the company, Claudia has a separate day job and is a passive owner. Consider the
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> Until the end of year 0, Magic Carpets (MC) was a C corporation with a calendar year. At the beginning of year 1 it elected to be taxed as an S corporation. MC uses the LIFO method to value its inventory. At the end of year 0, under the LIFO method, its
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> Farve Inc. recently elected S corporation status. At the time of the election, the company had $10,000 of accumulated earnings and profits and a net unrealized gain of $1,000,000 associated with land it had invested in (although some parcels had an unrea
> Mark is the sole shareholder of Tex Corporation. Mark first formed Tex as a C corporation. However, in an attempt to avoid having Tex’s income double taxed, Mark elected S corporation status for Tex several years ago. On December 31, 2019, Tex reports $5
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> Tempe Corporation is a calendar-year corporation. At the beginning of 2019, its election to be taxed as an S corporation became effective. Tempe Corp.’s balance sheet at the end of 2018 reflected the following assets (it did not have an
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> Last year, Miley decided to terminate the S corporation election of her solely owned corporation on October 17, 2018 (effective immediately), in preparation for taking it public. At the time of the election, the corporation had an accumulated adjustments
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> 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 depreciati
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> In its first year of existence (year 1), Willow Corp. (a C corporation) reports a loss for tax purposes of $50,000. In year 2 it reports a $40,000 loss. For year 3, it reports taxable income from operations of $100,000 before any loss carryovers. How muc
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> Using the facts in problem 51, what is the minimum tax that Pedro should pay to make the tax structure vertically equitable with respect to the amount of tax paid? This would result in what type of tax rate structure? Facts in Problem 51:
> Using the facts in problem 51, what is the minimum tax that Pedro should pay to make the tax structure vertically equitable based on the tax rate paid? This would result in what type of tax rate structure? Facts in Problem 51:
> Waco Leather Inc., 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 Mexico. All of the branch income is foreign branch income. W
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> F varies jointly as q1 and q2 and inversely as the square of d. If F = 80 when q1 = 4, q2 = 16, and d = 0.4, determine F when q1 = 12, q2 = 20, and d = 0.2. (a)Write the variation equation an (b) determine the quantity indicated.
> One square meter equals 10,000 cm2. Use this information to convert the following. 0.75 m2 to square centimeters
> Graph the system of linear inequalities and indicate the solution set. 3x - 2y ( 6 x - y ≤ 3
> Graph the solution set of the inequality, where x is an integer, on the number line.
> 4x + 2y = 2 3x - 2y = 12 Solve the system of equations by the addition method. If the system does not have a single ordered pair as a solution, state whether the system is inconsistent or dependent.
> S varies jointly as I and the square of T. If S = 4 when I = 10 and T = 4, determine S when I = 4 and T = 6. (a)Write the variation equation an (b) determine the quantity indicated.
> One square yard equals 9 ft 2. Use this information to convert the following. 48.1 yd2 to square feet
> x + y < 4 3x + 2y ( 6 Graph the system of linear inequalities and indicate the solution set.
> Graph the solution set of the inequality, where x is an integer, on the number line.
> Solve the system of equations by the substitution method. If the system does not have a single ordered pair as a solution, state whether the system is inconsistent or dependent. 2x + y = 12
> Fill in the blank with an appropriate word, phrase, or symbol(s). 2. A special type of relation where each value of the independent variable corresponds to a unique value of the dependent variable is called a(n)________ . 4. The set of values obtained fo
> (a)Write the variation equation an (b) determine the quantity indicated. A varies directly as the square of B. If A = 245 when B = 7, determine A when B = 12.
> One square yard equals 9 ft 2. Use this information to convert the following. 396 ft2 to square yards
> 4x + 2y > 8 y ≤ x + 1 Graph the system of linear inequalities and indicate the solution set.
> Graph the solution set of the inequality, where x is an integer, on the number line. x + 9 ( 5
> x - y = -1 y = 2x + 4 Solve the system of equations by the substitution method. If the system does not have a single ordered pair as a solution, state whether the system is inconsistent or dependent.
> (a)Write the variation equation an (b) determine the quantity indicated. C varies inversely as J. If C = 7 when J = 0.7, determine C when J = 14.
> Determine the shaded area. When appropriate, use the / key on your calculator and round your answer to the nearest hundredth. Answer: 32. Radius of circles: 6 = 3 mm Area of 4 circles: p (3)2 = 9p = 28.27433388 mm2 Area of rectangle: 24(6) = 144 mm2
> 3x - y ≤ 6 y < x – 4 Graph the system of linear inequalities and indicate the solution set.
> Graph the solution set of the inequality, where x is an integer, on the number line. 5x ( 45
> x = 5y - 12 x - y = 0 Solve the system of equations by the substitution method. If the system does not have a single ordered pair as a solution, state whether the system is inconsistent or dependent.
> Fill in the blank with an appropriate word, phrase, or symbol(s). 2. An expression that contains two terms in which each exponent that appears on a variable is a whole number is called a(n)________ . 4. The property that indicates that if the product of
> (a)Write the variation equation an (b) determine the quantity indicated. A varies jointly as R1 and R2 and inversely as the square of L. Determine A when R1 = 120, R2 = 8, L = 5, and k = /
> Determine the shaded area. When appropriate, use the key on your calculator and round your answer to the nearest hundredth.
> y ≤ 3x – 4 Draw the graph of the inequality.
> Graph the solution set of the inequality, where x is an integer, on the number line. -2 ( x
> Fill in the missing values. (28). 42.9 hg = _________ g (30). 8 dam = _________ m (32). 9.32 m ℓ = _________ℓ
> x + y = 3 y + x = 5 Solve the system of equations by the substitution method. If the system does not have a single ordered pair as a solution, state whether the system is inconsistent or dependent.
> (a)Write the variation equation an (b) determine the quantity indicated. M varies directly as J and inversely as C. Determine M when J = 12, C = 16, and k = 4.
> Determine the shaded area. When appropriate, use the key on your calculator and round your answer to the nearest hundredth.
> y ( -2x + 1 Draw the graph of the inequality.
> Graph the solution set of the inequality, where x is a real number, on the number line.
> Fill in the blanks with an appropriate word, phrase, or symbol(s). 2. The amount of cash the buyer must pay to the seller before the lending institution will grant the buyer a mortgage is known as the payment__________. 4. The final step of purchasing a
> 4x - y = 2 2x - y = 6 Solve the system of equations by the substitution method. If the system does not have a single ordered pair as a solution, state whether the system is inconsistent or dependent.
> (a)Write the variation equation an (b) determine the quantity indicated. R varies directly as the square of s. Determine r when s = 2 and k = 13.
> Determine the shaded area. When appropriate, use the key on your calculator and round your answer to the nearest hundredth.
> Draw the graph of the inequality. x + 2y ≤ 0
> Graph the solution set of the inequality, where x is a real number, on the number line. -4 ( x ( 1
> y = 2x - 1 y = 3x - 4 Solve the system of equations by the substitution method. If the system does not have a single ordered pair as a solution, state whether the system is inconsistent or dependent.
> 2. When one quantity increases while the other quantity decreases, it is an example of________ variation. 4. In the equation y = ox, k is called the constant of___________.
> Fill in the blanks with an appropriate word, phrase, or symbol(s). 2. In a right triangle, the side that is opposite the right angleis called the _________. 4. (a) A line segment from the center of a circle to any point on the circle is called the ______
> Fill in the blank with an appropriate word, phrase, or symbol(s). (a) a ( b means that a is________ than b. (b) a ( b means that a is_________ than b. 4. When solving an inequality, if you obtain a statement that is always false, such as 3 ( 5, the answe
> x varies inversely as y. Determine x when y = 15 and k = 45. (a)Write the variation equation an (b) determine the quantity indicated.
> 2. The amount of money that is present in an ordinary annuity after t years is known as the accumulated amount or the _____value of the annuity. 4. A variable annuity is an annuity that is invested in stocks, bonds, mutual funds, or other investments th
