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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 research
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- Joel is the sole shareholder of Mantee Corporation, a C corporation. Because Manatee’s sales have increased significantly over the last several years, Joes has determined that the corporation needs a new distribution warehouse. Joel has asked your advice as to whether (1) Manatee should purchase the warehouse or (2) he should purchase the warehouse and lease it to Manatee. What relevant tax issues will you discuss with Joel?arrow_forwardYou work as a tax consultant at a consultancy firm. One of your new clients has a food and beverage establishment. The establishment has increased its scale of operations recently and the number of employees of the establishment has been increased to 20. Tipping the employees is customary in the establishment. Currently, the establishment does not report any tip income in its employees’ Form W-2 and it wants to continue the same tradition. Help the owner of the establishment to understand the need to report the tip income and the applicability of FICA taxes on the tip income.arrow_forwardYour client has made previous lifetime gifts that have fully exhausted his applicable credit amount. He has asked you to advise him about the tax consequences of transferring his closely held business, valued at $350,000, to his daughter in exchange for a lump sum payment of $300,000. You should inform him that the most important tax implication of this intrafamily business transfer is that A) he will be making a taxable gift of $50,000, because the value of the transferred business exceeds the lump sum payment of $300,000. B) he will be making a taxable gift of $350,000, because the Chapter 14 rules require his retained interest to be valued at zero. C) he will have to include $50,000 minus one annual exclusion in adjusted taxable gifts in his estate tax calculation as an adjusted taxable gift. D) none of the above.arrow_forward
- Gibson Corporation’s balance sheet indicates that the company has $580,000 invested in operating assets. During the year, Gibson earned operating income of $67,280 on $1,160,000 of sales. Required Compute Gibson’s profit margin for the year. Compute Gibson’s turnover for the year. Compute Gibson’s return on investment for the year. Recompute Gibson’s ROI under each of the following independent assumptions:(1) Sales increase from $1,160,000 to $1,392,000, thereby resulting in an increase in operating income from $67,280 to $76,560.(2) Sales remain constant, but Gibson reduces expenses, resulting in an increase in operating income from $67,280 to $69,600.(3) Gibson is able to reduce its invested capital from $580,000 to $464,000 without affecting operating income.arrow_forwardPlease help me with e and f. Thanks!arrow_forwardWAR (We Are Rich) has been in business since 1989. WAR is an accrual-method sole proprietorship that deals in the manufacturing and wholesaling of various types of golf equipment. Hack & Hack CPAs has filed accurate tax returns for WAR's owner since WAR opened its doors. The managing partner of Hack & Hack (Jack) has gotten along very well with the owner of WAR—Mr. Someday Woods (single). However, in early 2022, Jack Hack and Someday Woods played a round of golf, and Jack, for the first time ever, beat Mr. Woods. Mr. Woods was so upset that he fired Hack & Hack and has hired you to compute his 2022 taxable income. Mr. Woods was able to provide you with the following information from prior tax returns. The taxable income numbers reflect the results from all of Mr. Woods's activities except for the items separately stated. You will need to consider how to handle the separately stated items for tax purposes. Also, note that the 2017–2021 numbers do not reflect capital loss…arrow_forward
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