Principles Of Taxation For Business And Investment Planning 2020 Edition
23rd Edition
ISBN: 9781259969546
Author: Sally Jones, Shelley C. Rhoades-Catanach, Sandra R Callaghan
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 7IRP
To determine
Identify the tax issue(s) and state each issue in question form.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Jerry and Sherry own and operate a partnership. Jerry's capital balance is $50,000 and
Sherry's is $55,000. Jerry and Sherry decided to admit a new partner, Allison, to their
partnership. By the terms of their partnership agreement, Jerry and Sherry share income/
loss equally,
Allison intends to contribute $40,000 to receive a Twenty-five percent interest in the
partnership.
Required:
a. Revalue the partnership assets
b. Determine the total equity of the partnership after the new partner is admitted
c. Determine the new partner's share of the total equity
d. Determine the bonus resulting from Allison's equity of her contribution
e. Make journal entries to rccord Allison's admission to the partnership
Laurel and Hardy form a 50/50 partnership (HaHa Partners) in 2018. Laurel contributes land with a fair market value of $700,000 and an adjusted basis of $500,000. The land is subject to a $250,000 mortgage which the partnership assumes. Hardy contributes $450,000 of cash.
Determine Laurel’s outside basis and Hardy’s outside basis after each of them has contributed their property and cash to form the partnership.
On June 30, 2020, Amal, the sole proprietor of the Amal Company, expands the company and establish a partnership with Umong and Abongga. The partners plan to share profits and losses as follows: Amal, 50%; Umong, 25%; and Abongga, 25%. They also agree that the beginning capital balances of the partnership will reflect this same relationship. Amal asked Umong to join the partnership because his many business contacts are expected to be valuable during expansion. Umong is also contributing P28,000 cash. Abongga is contributing P11,000 cash and marketable securities costing P42,000 to Abongga but are currently worth P57,500. Amal’s investment in the partnership is the Amal Company. He plans to pay off the notes with personal assets. The other partners have agreed that partnership will assume the accounts payable. The Statement of Financial Position for the Jamal Company follows:
 * The partners agree that the inventory is worth 85,000, and the equipment is worth half its original cost,…
Chapter 10 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 10 - Can a sole proprietorship be described as a...Ch. 10 - Mrs. Liu owns a business as a sole proprietor....Ch. 10 - This year, Mr. Pitts sole proprietorship generated...Ch. 10 - This year, Firm Q, a cash basis taxpayer, remitted...Ch. 10 - Prob. 5QPDCh. 10 - Define the tax base for the self-employment tax....Ch. 10 - Prob. 7QPDCh. 10 - Prob. 8QPDCh. 10 - Prob. 9QPDCh. 10 - Prob. 10QPD
Ch. 10 - Prob. 11QPDCh. 10 - Prob. 12QPDCh. 10 - Prob. 13QPDCh. 10 - Prob. 14QPDCh. 10 - Prob. 2APCh. 10 - Prob. 3APCh. 10 - Prob. 4APCh. 10 - Colin, a self-employed consultant, uses a room of...Ch. 10 - Prob. 6APCh. 10 - Prob. 7APCh. 10 - For 2019, Ms. Deming earned wages totaling...Ch. 10 - Calculate the total Social Security and Medicare...Ch. 10 - Prob. 11APCh. 10 - Prob. 12APCh. 10 - Jane is a self-employed attorney. This year, her...Ch. 10 - Prob. 14APCh. 10 - Prob. 15APCh. 10 - Amit is a limited partner in Reynolds Partnership....Ch. 10 - Kari is a limited partner in Lizard Partnership....Ch. 10 - Rochelle is a limited partner in Megawatt...Ch. 10 - Prob. 19APCh. 10 - Prob. 20APCh. 10 - Prob. 21APCh. 10 - Prob. 23APCh. 10 - AV Inc. is a member of an LLC. This year, AV...Ch. 10 - Prob. 25APCh. 10 - Prob. 26APCh. 10 - Prob. 27APCh. 10 - Prob. 28APCh. 10 - Prob. 29APCh. 10 - Refer to the facts in the preceding problem. BLS...Ch. 10 - Refer to the facts in part (c) of the preceding...Ch. 10 - For each of the following situations, indicate...Ch. 10 - a. If Video Associates is a partnership, and her...Ch. 10 - Prob. 34APCh. 10 - Prob. 1IRPCh. 10 - Javier is a full-time employee of B Inc. and...Ch. 10 - Mr. and Mrs. Chou file a joint income tax return....Ch. 10 - Travis is a professional writer who maintains his...Ch. 10 - Prob. 5IRPCh. 10 - Prob. 6IRPCh. 10 - Prob. 7IRPCh. 10 - Prob. 8IRPCh. 10 - Prob. 9IRPCh. 10 - Paulas Schedule K-1 from an LLC reported a 12,000...Ch. 10 - Marcus, a cash basis individual, is a general...Ch. 10 - Prob. 12IRPCh. 10 - Mr. and Mrs. West are the only shareholders in WW,...Ch. 10 - Prob. 14IRPCh. 10 - Prob. 15IRPCh. 10 - Prob. 16IRPCh. 10 - Prob. 17IRPCh. 10 - Prob. 1RPCh. 10 - Prob. 2RPCh. 10 - Herold had been a calendar year S corporation...Ch. 10 - Prob. 4RPCh. 10 - Mr. and Mrs. Janus operate a restaurant business...Ch. 10 - Prob. 2TPCCh. 10 - Prob. 3TPCCh. 10 - Marla recently inherited 50,000 and is considering...
Knowledge Booster
Similar questions
- 14. On March 1, 2020, Apalla and Cabañero formed a partnership with each contributing the following assets: Cabañero P502,500 P 1,172,500 1,256,250 3,768,750 Apalla Cash Machinery and equipment 418,750 Building Furniture and fixtures 167,500 The building is subject to mortgage loan of P1,340,000, which is to be assumed by the partnership. Agreement provides that Apalla and Cabañero share profits and losses 30% and 70%, respectively. On March 1, 2020 the balance in Cabañero's capital account should be: a. P6,197,500 b. P5,259,500 C. P5,108,750 d. P4,857,500 15. The same information in the previous number, except that the mortgage loan is not assumed by the partnership. On March 1, 2020 the balance in Cabañero's capital account should be: a. P6,197,500 b. P5,259,500 C. P5,108,750 d. P4,857,500arrow_forwardHarry and James formed a partnership. The partnership agreement stipulates the following:• Salary allowances of P40,000 and P60,000 will be provided to Harry and James, respectively.• Bonus of P10,000 will be given to James for being a managing partner.• Interest of 5% on the ending capital balances of Harry and James shall be provided.• Partners shall share in the P/L using the 6:4 ratio, respectively.The ending capital balances of Harry and James are P360,000 and P190,000, respectively.During the 1st year of operation, the partnership earned a profit of P800,000.Required:1. Compute for the partners’ share in the profit or loss of the partnership. 2. Prepare the journal entry to record the distribution of profit or loss to the partnerarrow_forwardAAA, BBB and CCC are partners sharing profits in the ratio of 5:3:2, respectively. As of December 31, 2021, their capital balances were P87,800 for AAA, P80,000 for BBB and P67,200 for CCC. On January 1, 2022, the partners admitted DDD as a new partner and according to their agreement; DDD will contribute P80,000 in cash to the partnership and also pay P10,000 for 15% of BBB's share. DDD will be given a 20% share in profits, while the original partners' share will be proportionately the same as before. After the admission of DDD, the total capital will be P330,000 and DDD's capital will be P70,000. What is the balance of BBB's capital, after the admission of CCC? 54,250  45,750  56,250  50,000arrow_forward
- The LM partnership will take over the assets and assume the liabilities of the proprietor as of January 1, 20x4 Determine the total assets after the formation of the partnership.arrow_forwardAAA, BBB and CCC are partners sharing profits in the ratio of 5:3:2, respectively. As of December 31, 2021, their capital balances were P87,800 for AAA, P80,000 for BBB and P67,200 for CCC. On January 1, 2022, the partners admitted DDD as a new partner and according to their agreement; DDD will contribute P80,000 in cash to the partnership and also pay P10,000 for 15% of BBB's share. DDD will be given a 20% share in profits, while the original partners' share will be proportionately the same as before. After the admission of DDD, the total capital will be P330,000 and DDD's capital will be P70,000. What is the balance of BBB's capital, after the admission of CCC?  A. 81,100 B. 72,600 C. 79,100 D. 74,600arrow_forwardKimble, Sykes, and Gerard open an accounting practice on January 1, 2022, in Chicago, Illinois, to be operated as a partnership. Kimble and Sykes will serve as the senior partners because of their years of experience. To establish the business, Kimble, Sykes, and Gerard contribute cash and other properties valued at $233,000, $192,500, and $104,500, respectively. An articles of partnership agreement is drawn up stipulating the following: • • Personal drawings are allowed annually up to an amount equal to 10 percent of the partner's beginning capital balance for the year. Profits and losses are allocated according to the following plan: 1. Each partner receives an annual salary allowance of $55 per billable hours worked. 2. Interest is credited to the partners' capital accounts at the rate of 12 percent of the beginning capital balance for the year. 3. Kimble and Sykes are eligible for an annual bonus of 10 percent of net income after subtracting the bonus, salary allowance, and…arrow_forward
- On December 31, 2024, Denis and Gamber agree to combine their sole proprietorships into a partnership. Their balance sheets on December 31 are shown as follows: (Click the icon to view the balance sheets.) Read the requirements. ..... Requirement 1. Journalize the contributions of Denis and Gamber to the partnership. (Record debits first, then, credits. Select explanations on the last line of the journal entry table.) Journalize the contribution of Denis. Date Accounts and Explanation Debit Credit Data table Dec. 31 Denis's Business Gamber's Business Current Current Market Book Value Market Value Book Value Value Assets Cash 17,000 $ 17,000 $ 5,000 $ 5,000 Accounts Receivable 27,000 25,000 8,000 6,000 Merchandise Inventory 57,000 51,000 32,000 32,000 122,000 104,000 52,000 56,000 Plant Assets, Net 223,000 $ 197,000 $ 97,000 $ 99,000 Total Assets Requirements Liabilities and Owner's Equity Accounts Payable 31,000 $ 31,000 $ 10,000 $ 10,000 Other Accrued Payables 11,000 11,000 1.…arrow_forwardShirley contributes property to a new partnership with a value of $1,000,000 and a basis of $400,000 that is secured by a $500,000 nonrecourse note. Under the terms of the partnership agreement, Shirley will be allocated 25% of all profits. The partnership agreement also states that "excess nonrecourse liabilities" will be allocated to partners according to profit ratios. How much of the nonrecourse liability will be allocated to Shirley? please dont provide answer in images thank youarrow_forwardBryan and Cody each contributed $120,000 to the newly formed BC Partnership in exchange for a 50% interest. The partnership used the available funds to acquire equipment costing $200,000 and to fund current operating expenses. The partnership agreement provides that depreciation will be allocated 80% to Bryan and 20% to Cody. All other items of income and loss will be allocated equally between the partners.  Upon liquidation of the partnership, property will be distributed to the partners in accordance with their § 704(b) book capital account balances. Any partner with a negative capital account must contribute cash in the amount of the negative balance to restore the capital account to $0.  In its first year, the partnership reported an ordinary loss (before depreciation) of $80,000 and depreciation expense of $36,000. In its second year, the partnership reported $40,000 of income from operations (before depreciation), and it reported depreciation expense of $57,600.  a. Calculate…arrow_forward
- Bryan and Cody each contributed $120,000 to the newly formed BC Partnership in exchange for a 50% interest. The partnership used the available funds to acquire equipment costing $200,000 and to fund current operating expenses. The partnership agreement provides that depreciation will be allocated 80% to Bryan and 20% to Cody. All other items of income and loss will be allocated equally between the partners.Upon liquidation of the partnership, property will be distributed to the partners in accordance with their § 704(b) book capital account balances. Any partner with a negative capital account must contribute cash in the amount of the negative balance to restore the capital account to $0. In its first year, the partnership reported an ordinary loss (before depreciation) of $80,000 and depreciation expense of $36,000. In its second year, the partnership reported $40,000 of income from operations (before depreciation), and it reported depreciation expense of $57,600. c. Now assume that…arrow_forwardBryan and Cody each contributed $120,000 to the newly formed BC Partnership in exchange for a 50% interest. The partnership used the available funds to acquire equipment costing $200,000 and to fund current operating expenses. The partnership agreement provides that depreciation will be allocated 80% to Bryan and 20% to Cody. All other items of income and loss will be allocated equally between the partners.Upon liquidation of the partnership, property will be distributed to the partners in accordance with their § 704(b) book capital account balances. Any partner with a negative capital account must contribute cash in the amount of the negative balance to restore the capital account to $0. In its first year, the partnership reported an ordinary loss (before depreciation) of $80,000 and depreciation expense of $36,000. In its second year, the partnership reported $40,000 of income from operations (before depreciation), and it reported depreciation expense of $57,600. a. Calculate the…arrow_forwardA, B and C decided to form ABC Partnership. The partners agreed that A will contribute his equipment which was originally purchased for P1,600,000 for use in his sole proprietorship. The equipment has a net book value of P500,000 immediately prior to formation of the partnership. A believes that the equipment can be sold for P750,000. A day after the partnership formation, the equipment was sold for P600,000 in an orderly transaction between the partnership and another market participant.  B will contribute his real property with historical cost of P2,700,000 but was appraised by an expert at a value of P3,000,000. The property is subject to a mortgage payable amounting to P600,000 which is to be assumed by the partnership. The partners agreed that B will have a 60% interest in the partnership and that A and C will have an interest equivalent to their corresponding capital contribution. C will contribute cash. How much is the agreed capitalization of the partnership? (The correct…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
