Relevant Facts
Wise-Holland Corporation, an S corporation, is split evenly between Marianne and Dory, two women with limited business knowledge. Wise Holland’s previous accountant of ten years was fired after Marianne received a notice of deficiency on her 2012 tax return due to $20,000 of disallowed flow through loss from Lucky Partnership, a small partnership deemed to have no profit motive; interest and a 20% penalty for substantial underpayment was also required, all of which Marianne paid immediately. She also signed a waiver extending her 2012 individual return statute of limitations three more years.
In 2013 Marianne sold land, building and equipment with a combined basis of $150,000 to an unrelated third party and in return received an installment note of $80,000 per year for five years. Of the $250,000 gain on sale, $150,000 was classified as Section 1245 gain and the remaining $100,000 was Section 1231 gain. In 2013, Marianne had a capital loss carryover of $60,000, $50,000 of which she used to offset her Section 1231 gain; she recognized no Section 1245 gain. The following year she recognized $40,000 of 1245 gain and $10,000 of Section 1231 gain which she promptly offset with the last $10,000 of the capital loss carryover. In 2015, she recognized $50,000 Section 1245 gain and no Section 1231 gain.
On June 1, 2016, exactly three months ago, Marianne and Dory received an audit notice for Wise-Holland’s 2011 tax return because some deductions taken were
Sale of rental property does not qualify for exclusion 121 because the two year resident occupation limit cannot be satisfied in income producing business property. The sale will fall under section 1231 which encompasses transactions of sales or exchanges of business property held for longer than one year. In order to determine treatment of section 1231 you must combine all section 1231 gains and losses for the year. A net loss is an ordinary loss. A net gain is ordinary income up to the amount of your non-recaptured section 1231 losses from previous years. Any remaining balance becomes a long-term capital gain. The formula for calculating gain or loss involves subtracting the cost basis from the selling price. If you have taken depreciation on the property in the past and are
Since we had been doing business with her for over 12 years, we felt that she would receive all the proper training, and we never doubted her skills. Then within the last couple of years, we started detecting our income tax returns would take longer, not knowing why, so we would
With the signing of the Treaty of Big Tree, Morris transferred the title to 3.3 million acres of land in western New York to the Holland Land Company. Theophilus Cazenove, the Agent-General of the Holland Land Company, hired Joseph Ellicott as Chief Surveyor in July 1797. Ellicott's experience included surveying the company's land in northwestern Pennsylvania. After extinguishing the Seneca Indians' claim to the land at Big Tree, Ellicott's objectives for the survey were to lay out the 3.3 million acres of company land, arrange the specific boundaries for the Seneca Indian Reservations and subdivide all the towns into six square miles. Where the land and its various features permitted, counties were divided into townships measuring six miles
basis of $110,000. Even though § 351 applies, Tina may recognize her realized loss of $10,000.
The log maintained by the couple indicates that the couple used 14 guaranteed personal days. If even 1 out of the 28 days that the couple partially or fully worked on the house is considered a personal day than the 14-day provision is violated. However, if none of those days turn out to be considered personal days then the loss in excess over rental income can be deducted according to section 280A. Section 183(a) permits no allowable deductions for activities not found to be engaged in for profit. However, we found that the Harrell’s activities are found to be engaged in for profit and should therefore be allowed these deductions.
My clients, Charlene and Alton Dutro, have lived in their home for two and one-half years. However, the Dutros choose to remodel and enlarge their house. Consequently, their architect cautioned that increasingly strict building and permit restrictions had been in effect since a decade ago when the house was built. As a result, the Dutros decided to demolish their house and rebuild on the property. They did not reside in the house but instead sold it and realized a gain of over $500,000. For calculation on their Federal income tax return, the Dutros reduced the realized gain that exceeded the $500,000 by the $500,000 exclusion of § 121. The IRS issued an income tax deficiency notice because they noted that the Dutros did not satisfy the two-out-of-five years requirement under § 121 (a). Consequently, the present issue is to determine who is correct in this situation. Therefore, I must ascertain if the Dutros satisfied this requirement under § 121 (a).
This case provides an opportunity to use accounting authority to account for the two issues in the
The Responsible Company is written by Yvon Chouinard who is founder and co-owner of Patagonia and Vincent Stanley who was a sometimes Patagonia employee. In their book, they raise the point that no companies could be found in this world, but they are doing the best job to protect their stockholders. This book is really helpful for those people who wants to become more successful in their business career life. It shows us what the company has studied and what strategies has used although the book is not really about the story of the Patagonia company.
Riggers Inc (“Riggers, “client, or “Company”) is audited by Stone LLC CPA firm (“Stone” or “auditor”). The Compa” ” ny builds and owns offshore drilling rigs. Riggers is a US-based corporation that recently expanded its operations into Brazil (the only foreign-based operations for Riggers). As a result of this expansion, the client has encountered two complex issues related to accounting for income taxes. During the 2012 year-end audit, the auditors must use professional judgment with regard to these two income tax accounting issues. The first issue relates to
is a small, two-person accounting firm offering traditional tax preparation services. We will also provide financial planning advisement services to individuals. The firm is owned and run by Shaniqua Brown, prospective CPA in Newark, DE. The second employee of BATS is Sonya Brown, mother of Shaniqua Brown, who will serve as the receptionist and answer all incoming phone calls and schedule all appointments. We will service the needs of individuals as well as small businesses. The firm offers tax accounting, management accounting, and QuickBooks set-up and training courses for small business clients. Initially, the majority of BAT’S business will be generated from individuals but as revenue increases, more sales will come from
1. Assume there are three separate real estate companies US Realty (which uses the cost model), UK Realty (which uses the revaluation model, and International Realty (which uses the fair value model). Assume that on December 31, 2003, each company pays £1,000 cash to obtain investment property comprising of land with negligible value and an office building worth £1,000. The building has a 10 year useful life, has no residual value, and is expected to provide a constant stream of economic benefits over time. What is the accounting entry for each company for the following four scenarios:
One of America’s largest forest products/paper firms with sales of $6.5Billion in 1983 and a net income of $105 million. The case study revolves around Atlantic Corporation’s intention to add linerboard capacity. In order to achieve this goal, they started looking at viable solutions, including purchasing and acquiring mill and box plants instead of through construction and fabrication of new plants and equipment. This included the possible acquisition of Royal Paper’s “crown jewels”, that is, the Monticello mill and the corrugated box plants.
In this case study of Berkshire Industries PLC, we will be focusing on the evaluation of their new incentive system and address their potential options. This new system focuses on economic profits instead of accounting profits. To better understand the implications of the economic profit-focused system, we will perform a data analysis on the companies Snack Division. Furthermore, we will assess the negative effect this system had on their underperforming division, Spirits.
1) Estimate the WACC that is appropriate for discounting the Collinsville plant’s incremental cash flows. You should estimate and present each component of the WACC separately, explaining briefly but clearly what assumptions you are making for each of them. In the same spirit, estimate the appropriate all-equity cost of capital for the APV-based valuation.
The Salomon principle dictates that if the company is established in accordance with the requirements of the Companies Act 2006, it starts to operate as a separate legal entity. The corporate veil becomes the dividing line between this entity and its shareholders. However, it soon became obvious that this concept can be easily abused, therefore Courts fought hard in order to establish exceptions to the Salomon principle in the form of lifting or piercing the veil, allowing them to look behind the ‘curtain’ if they spot some irregularity. In order to justify these drastic measures, Courts would look for something substantive, such as an agency relationship, fraud, avoidance of obligations, or group piercing grounds. In order to determine