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
Videos
Textbook Question
Chapter 16, Problem 8AP
Ms. Pay, who has a 40.8 percent marginal tax rate on interest income (37 percent income tax + 3.8 percent Medicare contribution tax), owns HHL corporate bonds in her investment portfolio. She earned $74,800 interest this year on her HHL bonds. Compute her after-tax
- a. She received two semiannual cash payments of $37,400 each.
- b. She instructed HHL to reinvest her interest payments in additional bonds.
- c. The entire $74,800 represented amortization of OID.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Elizabeth makes the following interest-free loans during the year. Assume that tax avoidance is not a principal purpose of any of the loans.
The relevant Federal rate is 5% and that the loans were outstanding for the last six months of the year.
Borrower's Net
Borrower Amount
Investment Income Purpose of Loan
Richard
$5,000
$800
Gift
Woody
$8,000
$600
Stock purchase
Irene
$105,000
$0
Purchase principal residence
By how much do each of these loans increase Elizabeth's gross income?
If an amount is zero, enter "0".
a. Richard is not
subject to the imputed interest rules because the $10,000 gift loan exception does
apply. Elizabeth's
gross income from the loan is $
0
b. The $10,000 exception does not
income producing
apply to the loan to Woody because the proceeds were used to purchase
assets. Although the $100,000 exception applies
to this loan, the amount of imputed interest is
1,000 X.Incorrect
is $
0 ✓.
c. None of the exceptions apply
gross income from the loan is $
to the loan to…
Isabel, a calendar year tax payer, uses the cash method of accounting for her soul proprietor ship. In late December she received a $60,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $60,000 bill anytime before January 30 of next year without penalty. Assume her marginal tax rate is 37 percent this year and next year, and that she can earn an after-tax rate of return of 8 percent on her investments. What is the after-tax cost if Isabel pays the $60,000 bill in January?
Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $27,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 35 percent next year, and that he can earn an after-tax rate of return of 12 percent on his investments. Use Exhibit 3.1.
What is the after-tax income if Hank sends his client the bill in January?
What is the after-tax income if Hank expects his marginal tax rate to be 24 percent next year and sends his client the bill in January?
Chapter 16 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 16 - Contrast the income tax consequences of the yields...Ch. 16 - Prob. 2QPDCh. 16 - Mrs. Buckley, age 74, has 100,000 in a certificate...Ch. 16 - Ms. Quint sadly concluded that a 7,500 debt owed...Ch. 16 - Prob. 5QPDCh. 16 - Prob. 6QPDCh. 16 - Discuss the potential effect of the passive...Ch. 16 - Prob. 8QPDCh. 16 - Prob. 9QPDCh. 16 - Prob. 10QPD
Ch. 16 - Prob. 11QPDCh. 16 - Prob. 1APCh. 16 - Mr. and Mrs. Lays taxable income is 679,000, which...Ch. 16 - Dianne Stacy, a single taxpayer, has 272,000...Ch. 16 - Prob. 4APCh. 16 - Mrs. Nunn, who has a 24 percent marginal tax rate...Ch. 16 - Refer to the preceding problem and assume that...Ch. 16 - Mrs. Yue, a resident of Virginia, paid 50,000 for...Ch. 16 - Ms. Pay, who has a 40.8 percent marginal tax rate...Ch. 16 - Mr. Jolly received the 100,000 face amount on the...Ch. 16 - Prob. 10APCh. 16 - Prob. 11APCh. 16 - Prob. 12APCh. 16 - Prob. 13APCh. 16 - Fifteen years ago, Mr. Fairhold paid 50,000 for a...Ch. 16 - Refer to the facts in the preceding problem....Ch. 16 - Prob. 16APCh. 16 - Prob. 17APCh. 16 - Three years ago, Mrs. Gattis loaned 10,000 to Mr....Ch. 16 - Prob. 19APCh. 16 - Prob. 20APCh. 16 - Mrs. Beard recognized a 12,290 capital loss on the...Ch. 16 - Prob. 22APCh. 16 - Prob. 23APCh. 16 - Mr. and Mrs. Revel had 206,200 AGI before...Ch. 16 - Prob. 25APCh. 16 - Mr. Fox, a single taxpayer, recognized a 64,000...Ch. 16 - Mrs. Cox, a head of household, earned a 313,000...Ch. 16 - Prob. 28APCh. 16 - Prob. 29APCh. 16 - Mr. Dunn, who has a 32 percent marginal rate on...Ch. 16 - Prob. 31APCh. 16 - Prob. 32APCh. 16 - Prob. 33APCh. 16 - Prob. 34APCh. 16 - Prob. 35APCh. 16 - Prob. 36APCh. 16 - Ms. Turney owns a one-half interest in an...Ch. 16 - Prob. 38APCh. 16 - Prob. 39APCh. 16 - Prob. 40APCh. 16 - Mr. Erwins marginal tax rate on ordinary income is...Ch. 16 - Prob. 42APCh. 16 - Prob. 43APCh. 16 - Prob. 44APCh. 16 - Prob. 45APCh. 16 - Mrs. Wolter, an unmarried individual, owns...Ch. 16 - Prob. 1IRPCh. 16 - Prob. 2IRPCh. 16 - Prob. 3IRPCh. 16 - Prob. 4IRPCh. 16 - Prob. 5IRPCh. 16 - Two years ago, Ms. Eager loaned 3,500 to her...Ch. 16 - Prob. 7IRPCh. 16 - This year, Ms. Tan had a 29,000 capital loss...Ch. 16 - Prob. 9IRPCh. 16 - Mr. Pugh has a 7,900 adjusted basis in his limited...Ch. 16 - Prob. 11IRPCh. 16 - Mr. Durst died on March 8. His taxable estate...Ch. 16 - Prob. 13IRPCh. 16 - Prob. 1RPCh. 16 - Prob. 2RPCh. 16 - Prob. 1TPCCh. 16 - Ms. Kaspari, who has a 24 percent marginal rate on...Ch. 16 - Prob. 3TPCCh. 16 - Prob. 4TPC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Marlene, a cash basis taxpayer, invests in Series EE U.S. government savings bonds and bank certificates of deposit (CDs). Determine the tax consequences of the following on her 2019 gross income: a. On September 30, 2019, she cashed in Series EE bonds for 10,000. She purchased the bonds in 2009 for 7,090. The yield to maturity on the bonds was 3.5%. b. On July 1, 2018, she purchased a CD for 10,000. The CD matures on June 30, 2020, and will pay 10,816, thus yielding a 4% annual return. c. On July 1, 2019, she purchased a CD for 10,000. The maturity date on the CD was June 30, 2020, when Marlene would receive 10,300.arrow_forwardLisa records nonrefundable Federal income tax credits of 65,000 for the year. Her regular income tax liability before credits is 190,000, and her TMT is 150,000. a. What is Lisas AMT? b. What is Lisas regular income tax liability after credits?arrow_forwardCalculating taxes on security transactions. If Julia Diaz is single and in the 24 percent tax bracket, calculate the tax impact of each of the following security transactions. (Use the IRS regulations for capital gains in effect in 2018.) Treat each of the following cases as independent of the others. a. She sold stock for 1,200 that she purchased for 1,000 5 months earlier. b. She sold bonds for 4,000 that she purchased for 3,000 3 years earlier. c. She sold stock for 1,000 that she purchased for 1,500 15 months earlier.arrow_forward
- Lana Long, age 32, chief executive officer of News America borrows $100,000 from her employer as a bridge loan. Assume that the applicable federal rate for year one of the loan is 6 per cent, but that American only charges 2 percent. What are the likely tax consequences for Lana? Explain.arrow_forwardIsabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a $35,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $35,000 bill anytime before January 30 of next year without penalty. Assume her marginal tax rate is 37 percent this year and next year, and that she can earn an after-tax rate of return of 9 percent on her investments. Required: What is the after-tax cost if Isabel pays the $35,000 bill in December? What is the after-tax cost if Isabel pays the $35,000 bill in January? Use Exhibit 3.1. Note: Round your answer to the nearest whole dollar amount. Based on requirements a and b, should Isabel pay the $35,000 bill in December or January?arrow_forwardAnastasia wants to invest $1.5M. Based on her income she is currently in the 33% tax bracket for ordinary income and in the 15% bracket for long-term capital gains. Her tax brackets for state income tax purposes are 7% and 0% on long-term capital gains. Consider the following situations: Situation 2 Situation 2 Corporate Municipal Type Bonds Bonds Time horizon 5 years 7 years 11% interest 6.5% interest Income annually annually Discount rate 5.5% 5% Repayment/Sale Repaid after 5 Repaid after years 7 years Taxable at Not taxable for federal ordinary Comments income tax rates; no state income tax but state income tax of 7% applies income tax Requirements: Determine the net present value of the after-tax cash flow for: (1) Situation 1: (2) Situation 2:arrow_forward
- Isabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a $41,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $41,000 bill anytime before January 30 of next year without penalty. Assume her marginal tax rate is 37 percent this year and next year, and that she can earn an after-tax rate of return of 6 percent on her investments. Required: What is the after-tax cost if Isabel pays the $41,000 bill in December?arrow_forwardHank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December, he performed $25,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume his marginal tax rate is 32 percent this year and will be 35 percent next year, and that he can earn an after-tax rate of return of 12 percent on his investments. Use Exhibit 3.1. Required: (PLEASE ONLY SOLVE QUESTION NUMBER 4) What is the after-tax income if Hank sends his client the bill in December? What is the after-tax income if Hank sends his client the bill in January? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. Should Hank send his client the bill in December or January? What is the after-tax income if Hank expects his marginal tax rate to be 24 percent next year and sends his client the bill in January? Note: Do not round intermediate calculations. Round your answer to…arrow_forwardIsabel, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December she received a $44,000 bill from her accountant for consulting services related to her small business. Isabel can pay the $44,000 bill anytime before January 30 of next year without penalty. Assume her marginal tax rate is 37 percent this year and next year, and that she can earn an after-tax rate of return of 9 percent on her investments. a. What is the after-tax cost if Isabel pays the $44,000 bill in December? After-tax cost b. What is the after-tax cost if Isabel pays the $44,000 bill in January? Use Exhibit 3.1. (Round your answer to the nearest whole dollar amount.) After-tax costarrow_forward
- Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December he performed $22,000 of legal services for a client. Manny typically requires his clients to pay his bills immediately upon receipt. Assume Manny's marginal tax rate is 37 percent this year and next year, and that he can earn an after-tax rate of return of 8 percent on his investments. a. What is the after-tax income if Manny sends his client the bill in December? After-tax income b. What is the after-tax income if Manny sends his client the bill in January? Use Exhibit 3.1. (Round your answer to the nearest whole dollar amount.) After-tax income c. Based on requirements a and b, should Manny send his client the bill in December or January? O December O Januaryarrow_forward! Required information [The following information applies to the questions displayed below.] Christopher is a self-employed cash-method, calendar-year taxpayer, and he made the following cash payments related to his business this year. Calculate the after-tax cost of each payment assuming Christopher has a 37 percent marginal tax rate. b. $800 of interest on a short-term loan incurred in September and repaid in November. Half of the loan proceeds was used immediately to pay salaries and the other half was invested in municipal bonds until November. After-tax costarrow_forwardDana intends to invest $66,000 in either a Treasury bond or a corporate bond. The treasury bond yields 5 percent before tax, and the corporate bond yields 6 percent before tax. Assume Dana's federal marginal rate is 24 percent and she itemizes deductions. a-2. How much interest after-tax would Dana earn by investing in the corporate bond? b-1. If she were to move to another state where her marginal state rate would be 10 percent, which of the two options should she choose? b-2. How much interest after-tax would Dana earn by investing in the corporate bond as per requirement b-1?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
How to Calculate your Income Tax? Step-by-Step Guide for Income Tax Calculation; Author: ETMONEY;https://www.youtube.com/watch?v=QdJKpSXCYmQ;License: Standard YouTube License, CC-BY
How to Calculate Federal Income Tax; Author: Edspira;https://www.youtube.com/watch?v=2LrvRqOEYk8;License: Standard Youtube License