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
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Chapter 15, Problem 1IRP
To determine
Identify the issue for the situation given.
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A. Bob Loblaw and Steve Holt get together to form a new corporation. They each own 50% of the stock. Neither is employed by the corporation. In the first year of operation, the corporation generates $100,000 of taxable income and pays $20,000 in dividends ($10,000 each to Bob and Steve). Assuming a 21% corporate tax rate, a 30% personal tax rate on ordinary income, and a 15% personal tax rate on dividend, how much corporate and personal tax will be paid?
Corporate tax ______________________
Bob and Steve each pay tax ____________________
B. Same as A) but now assume that instead of a corporation they form a partnership. Instead of receiving dividends, Bob and Steve each withdraw $10,000 from the partnership (also known as a “draw”).
Partnership tax ______________________
Bob and Steve each pay tax ____________________
Pine Corporation, a calendar-year corporation, was formed three years ago by its sole shareholder, Connor, who has
always operated it as a C corporation. However, at the beginning of this year, Connor made a qualifying S election for Pine
Corporation, effective January 1. Pine Corporation reported $70,000 of C corporation earnings and profits on the effective
date of the S election. This year (its first S corporation year), Pine Corporation reported business income of $50,000.
Connor's basis in his Pine Corporation stock at the beginning of the year was $15,000.
What are the amount and character of income or gain Connor must recognize on the following alternative distributions,
and what is his basis in his Pine Corporation stock at the end of the year? (Leave no answer blank. Enter zero if
applicable. Enter N/A if not applicable.)
d. Connor received a $150,000 distribution from Pine Corporation at the end of the year.
Character
Amount
Capital gain
Dividend
Stock basis
Pine Corporation, a calendar-year corporation, was formed three years ago by its sole shareholder, Connor, who has
always operated it as a C corporation. However, at the beginning of this year, Connor made a qualifying S election for Pine
Corporation, effective January 1. Pine Corporation reported $70,000 of C corporation earnings and profits on the effective
date of the S election. This year (its first S corporation year), Pine Corporation reported business income of $50,000.
Connor's basis in his Pine Corporation stock at the beginning of the year was $15,000.
What are the amount and character of income or gain Connor must recognize on the following alternative distributions,
and what is his basis in his Pine Corporation stock at the end of the year? (Leave no answer blank. Enter zero if
applicable. Enter N/A if not applicable.)
a. Connor received a $40,000 distribution from Pine Corporation at the end of the year.
Character
Amount
N/A
N/A
Stock basis
Chapter 15 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 15 - Prob. 1QPDCh. 15 - Prob. 2QPDCh. 15 - Prob. 3QPDCh. 15 - Discuss the practical reasons why the tax law...Ch. 15 - Prob. 5QPDCh. 15 - Mr. Burnett owns 10 percent of the stock of ABC...Ch. 15 - This year, publicly held Corporation DF paid its...Ch. 15 - Mr. Zelig was recently promoted to an executive...Ch. 15 - Prob. 9QPDCh. 15 - Prob. 10QPD
Ch. 15 - Prob. 11QPDCh. 15 - Prob. 12QPDCh. 15 - Prob. 13QPDCh. 15 - Prob. 14QPDCh. 15 - Greg Company agreed to pay Ms. Bilko 45,000...Ch. 15 - Trent Inc. needs an additional worker on a...Ch. 15 - Prob. 3APCh. 15 - Mr. and Mrs. Brock own a bakery. Their marginal...Ch. 15 - Mr. and Mrs. Soon are the sole shareholders of SW...Ch. 15 - Prob. 6APCh. 15 - Mrs. Flay, age 57, participates in the group term...Ch. 15 - Mrs. Ellers corporate employer has a cafeteria...Ch. 15 - Mr. Nixon and Mr. Ryan are employed by HD Inc.,...Ch. 15 - Peet Company provides free on-site day care for...Ch. 15 - This year, Faro Inc., a calendar year taxpayer,...Ch. 15 - Prob. 12APCh. 15 - Prob. 13APCh. 15 - Prob. 14APCh. 15 - Refer to the facts in the preceding problem. Five...Ch. 15 - Prob. 16APCh. 15 - Prob. 17APCh. 15 - Prob. 18APCh. 15 - Prob. 19APCh. 15 - Prob. 20APCh. 15 - Prob. 21APCh. 15 - Prob. 22APCh. 15 - Prob. 23APCh. 15 - Prob. 24APCh. 15 - Prob. 25APCh. 15 - Prob. 26APCh. 15 - Prob. 27APCh. 15 - Refer to the facts in the preceding problem Assume...Ch. 15 - Prob. 29APCh. 15 - Prob. 30APCh. 15 - What is the maximum IRA contribution that Mr....Ch. 15 - Prob. 32APCh. 15 - Ms. Ray is age 46 and single. Her employer made a...Ch. 15 - Mr. and Mrs. Davos file a joint tax return. Each...Ch. 15 - Mr. and Mrs. Mario, ages 39 and 35, file a joint...Ch. 15 - Prob. 36APCh. 15 - Prob. 37APCh. 15 - Prob. 38APCh. 15 - Prob. 39APCh. 15 - Prob. 40APCh. 15 - Prob. 41APCh. 15 - Prob. 1IRPCh. 15 - Prob. 2IRPCh. 15 - Prob. 3IRPCh. 15 - Prob. 4IRPCh. 15 - Prob. 5IRPCh. 15 - Prob. 6IRPCh. 15 - Prob. 7IRPCh. 15 - Prob. 8IRPCh. 15 - Prob. 9IRPCh. 15 - Prob. 10IRPCh. 15 - Prob. 11IRPCh. 15 - Prob. 12IRPCh. 15 - Prob. 13IRPCh. 15 - Prob. 14IRPCh. 15 - Prob. 15IRPCh. 15 - Prob. 1RPCh. 15 - Prob. 2RPCh. 15 - Prob. 3RPCh. 15 - Prob. 4RPCh. 15 - This year, Mr. Joss accepted a job with BL Inc. He...Ch. 15 - Mr. Remling is entitled to a 5,200 bonus this year...Ch. 15 - Prob. 3TPCCh. 15 - Prob. 4TPC
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