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- You are the accountant for the Millenium Corporation. Last year the company purchased a $2,500,000 corporate jet to be used for executive travel. To help offset the cost of the airplane, your company occasionally rents the jet to the executives of two other corporations when it is not in use by Millenium.When the corporate tax return was filed this year, you began depreciating the jet by using MACRS. Today you received a letter from the IRS informing you that because your company occasionally rents the airplane to others, it is considered a commercial aircraft and must be depreciated as such. The corporate lawyers are considering disputing this IRS ruling and have asked you the following questions: How much depreciation did you claim this year? 2,500,000x.20= $500,000 claimed in depreciation this year Under the new category, how much depreciation would be claimed? 2,500,000x.1429= $357,250 claimed in depreciation in the new category If the company pays 30% income tax, what…Tax managers/consultants are said to adjust the timing of transactions in anticipation of expected tax changes. Assuming that you were a tax consultant, and a client sought your advice regarding her intention to donate her properties. It was December 10, 2017. Your client informed you that she will be donating 3 types of properties to 3 different persons. The value of the properties are as follows: Property 1: P 255,000 Property 2: P 450,000 Property 3: P 750,000 You discussed with her that such donations are subject to donor's tax. Will you advise your client to donate in 2017 or in 2018? Explain your answer. Provide computations to support your advice.Gavin Green operates a shop situated on a sharp bend in the road. During the income year a truck fails to take the bend and badly damages the front of the shop. Gavin is undecided whether to restore the front of the shop to its original condition at a cost of $25,000 or to rebuild it so that it has a much more attractive appearance. The cost of doing this would be $40,000.Required:Advise Gavin Green of the tax implications of:(a) Restoring the front of the shop to its original condition; and(b) Rebuilding the shop frontPlease refer to case law and legislation in your advice
- Mrs. Oliver is negotiating to purchase a tract of land from DC Company, a calendar year taxpayer. DC bought this land six years ago for $480,000. According to a recent appraisal, the land is worth $800,000 in the current real estate market. According to DC’s director of tax, the company’s profit on the sale will be taxed at 35 percent if the sale occurs this year. However, this tax rate will definitely decrease to 21 percent if the sale occurs next year. Mrs. Oliver is aware that DC would prefer the sale close next year. However, Mrs. Oliver needs the land immediately to begin construction of a new retail outlet. She offers to pay $875,000 for the land with the stipulation that the sale close by December 31. Required: Calculate the amount of after-tax cash for the each of the following alternatives. Should DC accept Mrs. Oliver’s offer?When Craig began his business, he invested his own 2020 Ford pick-up truck into the business. He originally paid $25,000 for the truck and the current estimated fair market value is $14,000. The truck will exclusively be used for the business. Craig would like to know how much to record the truck for in the accounting software. Research this and support your answer with an excerpt from the IRS publication citing this reasoning. (Hint: Search Publication 551)On August 15, 2021, Ms. Mones sold a 500-square meter residential house and lot for P3,000,000. The house was acquired in 2006 at P2,000,000. The Assessor's fair market values of the house and lot, respectively, wer P1,500,000 and P1,000,000. The zonal value of the lot was P5,000 per square meter. What is the capital gains tax? a.P150,000 b.P240,000 c.P180,000 d.P120,000
- Seved Help Ms. T. Potts, the treasurer of Ideal China, has a problem. The company has just ordered a new kiln for $560,000. Of this sum, $70,000 Is described by the supplier as an installation cost. Ms. Potts does not know whether the Internal Revenue Service (IRS) will permit the company to treat this cost as a tax-deductible current expense or as a capital investment. In the latter case, the company could depreciate the $70,000 straight-line over 5 years. The tax rate is 30% and the opportunity cost of capital is 5%. a. What is the present value of the cost of the kiln if the installation cost is treated as a separate current expense? b. What is the present value of the cost of the kiln if the installation cost is treated as a part of the capital investment? (Round your answer to the nearest whole dollar amount.) a. Present value b. Present valuePeter purchased a rental property in 2010 at a cost of $650,000 ($460,000 for the building and $190,000 for the land). He had to pay the notary ($1,150), the inspection ($780) and the “Welcome Tax” ($7,100). The rental property was profitable for all years. As of January 1, 2020, the UCC of Class 1 was $427,330. Peter sold the property in 2020. The selling price was $(870,000) (70% allocated to the building; 30% to the land). When selling the property, James had to pay for the evaluation ($350) and the commission to the real estate agent ($20,500). Required: a) Calculate the taxable capital gain on the sale of the property. b) Calculate the recapture of CCA.Tiptop Farms, a sole proprietorship, had a gross income of $600,000 in 2022. Tiptop Farms expenses were equal to $320,000. Tiptop had interest expenses of $80,000 and depreciation expenses of $75,000 during the year. Tiptop's owner withdrew $25,000 from the business during the year to help pay college expenses for the owners' children. The tax schedule for 2022 is: Income Tax Rate $0 - 40,000 15% $40,001 - 100,000 28% $100,000 150,000 31% $150,001+ 35% 1. What was Tiptop's taxable income during 2022? 2. What is Tiptop's tax liability for 2022? 3. What are Tiptop's average and marginal tax rates for the year (carry to two decimal places; e.g., 12.34%)? 4. If Tiptop is considering a new investment, what tax rate should they consider?
- A new client, John Dobson, recently formed John’s Premium Steakhouse, Inc., to operate a new restaurant. The restaurant will be a first-time business venture for John, who recently retired after 30 years of military service. John transferred cash to the corporation in exchange for 100% of its stock, and the corporation is considering leasing a building and restaurant equipment. John has asked you for guidance on the tax treatment of various expenses (e.g., licensing, training, advertising) he expects the corporation to incur during the restaurant’s pre-opening period. Research the tax treatment of startup expenditures, including the point which a business begins for purposes of determining what expenses are included. Prepare a memo for the client files describing the results of your research17. Mr. Panicker is the owner of house property whose municipal valuation is 55,000 (Not covered by Rent control Act). The construction of the property started on 2nd March 2015 and completed on 31st December 2019. The building consists of three flats and let it outs for Mr. A. B and C on an annual rent of 20,000 each. Determine the annual value of the house if Mr. A and B used the house for residential purposes and C for business purposes. The owner paid the municipal tax for all the units which amount to 8, 000. (Ans. A.V. of the house 52,000.) rty of Raju , Heis rond case Income Caju by virtue of 18. Compute the income from house property from the following information. Fair rent 36,000 Let out 3,500 p.mIn 2021, Wilma Way’s sole proprietorship, WW Bookstore, generated $135,000 net profit. In addition, Wilma recognized a $6,500 Section 1231 gain on the sale of business furniture. The business checking account earned $450 interest income. Required: A. Which of these income items are subject to self-employment tax? B. Compute Wilma’s 2021 self-employment tax, assuming Wilma has no other earned income. C. Compute Wilma's allowable QBI deduction, assuming $55,000 of W-2 wages and $110,000 unadjusted basis of tangible depreciable property. Further assume the overall taxable income limitation on QBI does not apply and Wilma’s overall taxable income is sufficiently high that the W-2 wage limitation applies. D. Compute the overall impact of the bookstore activity on Wilma’s 2021 taxable income.