None Problem 15-60 (LO 15-3) (Static)[The following information applies to the questions displayed below.]Mickey, Mickayla, and Taylor are starting a new business (MMT). To get the business started, Mickey is contributing$200,000 for a 40 percent ownership interest, Mickayla is contributing a building with a value of $200,000 and a tax basisof $150,000 for a 40 percent ownership interest, and Taylor is contributing legal services for a 20 percent ownershipinterest. What amount of gain or income is each owner required to recognize under each of the following alternativesituations? [Hint Look at IRC §351 and $721.) (Leave no answer blank. Enter zero if applicable.)Problem 15-60 Part a (Static)a. MMT is formed as a C corporation.Gain or income to be recognizedMickeyMickaylaTaylor

Under IRC §351, the transfer of property to a corporation in exchange for stock generally allows for…

Answered: Problem 15-60 (LO 15-3) (Static) [The…

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter19: Deferred Compensation

Section: Chapter Questions

Problem 1RP

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9. Angela and Thomas are planning to start a new business. Thomas will invest cash in the business but not be involved in day-to-day operations. Angela plans to work full-time overseeing business operations. The two currently project that the business will generate $200,000 of annual taxable income before consideration of any payments to Angela for her services. Both agree that Angela's services are worth $100,000 Angela and Thomas plan to form a passthrough entity but are unsure whether to choose a partnership or an S corporation. In either case, they will be equal owners of the entity. Given their other sources of income, both Thomas and Angela have a 37 percent marginal tax rate on ordinary income. (Ignore any payroll or self employment tax consequences.) a. If the business is operated as a partnership, calculate ordinary income allocated to each owner, and explain the treatment by the partnership and by Angela of her $100,000 payment for services. b. If the business is operated as…
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Part ATom Jones, aged 60, has been running his business for many years. He has decided to take early retirement. His daughter, Sonya, has been working in the business for the last 5 years. Tom would like to transfer the business to Sonya.Alternatively, a local businessman has made an offer to buy the business for 850,000.REQUIRED:(a) Advise Tom of any capital gains tax liability that he might have(i) on the transfer of the business to his daughter(ii) on the sale of the business to the local businessman.(b) Recommend which course of action he should take in order to minimise his tax liabilities. Part BSonya has always wanted to travel. She is considering moving to Australia in 2023. She has agreed with her father Tom to take over the business now. Before she leaves she hopes to sell the business to help fund her move to Australia.REQUIRED:Advise Sonya of the capital gains tax liability she would have if she sells the business in 2023. Part CTom’s son, Daniel, who moved to the US many…
! Required information [The following information applies to the questions displayed below.] Ansel purchased raw land three years ago for $200,000 to hold as an investment. After watching the value of the land drop to $145,000, he decided to contribute it to Mountainside Developers LLC in exchange for a 5 percent capital and profits interest. Mountainside plans to develop the property and will treat it as inventory, like all the other real estate it holds. b. If Mountainside sells the property for $100,000 after holding it for two years, how much gain or loss does it recognize, and what is the character of the gain or loss? Ordinary loss Ordinary loss
Problem 14-28 (LO. 4, 7) Mona and Denise, mother and daughter, operate a local restaurant as an LLC. The MD LLC earned a profit of $200,000 in the current year. Denise's equal LLC interest was acquired by gift from Mona. Assume that capital is a material income-producing factor and that Mona manages the day-to-day operations of the restaurant without any help from Denise. Reasonable compensation for Mona's services is $50,000. a. The MD income allocated to Mona is $ b. The maximum amount of LLC income that can be allocated to Denise is $ c. Assume that Denise is 15 years old, has no other income, and is claimed as a dependent by Mona. The earned income is taxed and the remaining income is taxed
Question 1 Sharon runs a lawn mowing business (which is GST registered) and she decides to employ her son Keith in the business. Sharon pays Keith wages of $100,000 per annum – whereas if she had hired someone else to do the work she would have paid the person only $55,000. Sharon thinks this ‘extra’ amount to Keith is okay because it is paid due to ‘natural love and affection’ and it helps Keith with paying his expenses (such as attending university). Keith is 17 years of age. Discuss the tax treatment of these payments to Keith when the business is conducted as: sole trader (with Sharon the sole trader) general partnership (with Sharon and Keith partners) general partnership (with Sharon and another person Melanie as partners) corporation (with Sharon as sole shareholder) trust (with a corporation set up to act as Trustee. Sharon is the sole shareholder of the corporate trustee, and both Sharon and Keith are potential beneficiaries).…
A. What are the advantages and disadvantages of changing the company organization from a sole proprietorship to an LLC? What are the advantages and disadvantages of changing the company organization from a sole proprietorship to a corporation? B. Your mother is about to retire. Her firm has given her the option of retiring with a lump sum of $30, 000 or an annuity of $3,500 for 15 years. Which is worth more now, if an interest rate of 5 percent is used for the annuity? Please please anwser that
Joe, June, and Jim—coworkers—decide that they want to start their own business. Joe has $200,000 to contribute, June has equipment valued at $100,000 (basis = $90,000), and Jim has real estate suitable for the business valued at $200,000 (basis = $110,000). Joe and Jim are each to receive 40 percent of the corporate stock, and June is to receive 20 percent. Joe and June transfer title to their property to the corporation immediately. When Jim tries to transfer title to the real estate to the corporation, several legal errors in the title are discovered, and he is unable to transfer title until the errors are corrected. Correcting the errors takes more than 14 months. In the meantime, the corporation begins operating, renting the building from Jim. In the 15th month, Jim is able to transfer title and receive his stock. Is Jim eligible to use the nonrecognition provisions of Section 351 on this transfer?
Problem 3-42 (Algorithmic) (LO. 5, 6, 9) David and Ruby are engaged and plan to get married. During 2022, David is a full-time student and earns $5,800 from a part-time job. With this income, student loans, savings, and nontaxable scholarships, he is self-supporting. For the year, Ruby is employed and has wages of $70,400. Click here to access the standard deduction table to use. Click here to access the Tax Rate Schedules. If an amount is zero, enter, "0". Do not round your intermediate computations. Round your final answer to nearest whole dollar. a. Compute the following: Gross income and AGI Standard deduction (single) Taxable income Income tax David Filing Single 5,800 12,950 0 Ruby Filing Single 70,400 12,950 57,450
Problem 15-38 (LO. 2, 5) Tom Howard and Frank Peters are good friends (and former college roommates). Each owns investment property in the other's hometown (Tom lives in Kalamazoo, MI; Frank lives in Austin, TX). To make their lives easier, they decide to exchange the investment properties. Under the terms of the exchange, Frank will transfer realty (20 acres of unimproved land; adjusted basis of $52,000; fair market value of $80,000) and Tom will exchange realty (25 acres of unimproved land; adjusted basis of $60,000; fair market value of $92,000). Tom's property is subject to a mortgage of $12,000 that will be assumed by Frank. If an amount is zero, enter "0". b. What are their adjusted bases?Frank's adjusted basis is $fill in the blank 01a88e015fb6072_1, and Tom's adjusted basis is $fill in the blank 01a88e015fb6072_2. c. As an alternative, Frank has proposed that rather than assuming the mortgage, he will transfer cash of $12,000 to Tom. Tom would use…
! Required information [The following information applies to the questions displayed below.] This year Randy paid $28,450 of interest on his residence. (Randy borrowed $456,000 to buy his residence, which is currently worth $506,000.) Randy also paid $2,650 of interest on his car loan and $4,425 of margin interest to his stockbroker (investment interest expense). How much of this interest expense can Randy deduct as an itemized deduction under the following circumstances? a. Randy received $2,320 of interest this year and no other investment income or expenses. His AGI is $75,000. Interest deductible
You join with three friends from college – each of you a singleton – and pool your cash to purchase a big old “fixer-upper” house. All four of your names are on the deed as equal (25%) co-owners. All of you immediately move in together and spend a memorable two+ years making improvements to the house and beautifying the landscaping with your green thumbs. Then you sell and make a very nice profit! What is the maximum § 121 exclusion from gross income that would (potentially) be available with respect to this sale? (a) $250,000 split four ways, because that is the maximum exclusion available with respect to the sale of any residence. (b) $250,000 split four ways, because none of the four of you are married filing jointly. (c) $500,000. (d) $1,000,000 ($250,000 each).

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