What are the relevant tax issues that Celine faces in making her decision?

Celine is going to be subject to the AMT in 2005. She owns an investment building and is considering disposing of it and investing in other realty. Based on an appraisal of the building’s value, the realized gain would be $85,000. Ed has offered to purchase the building from Celine with the closing date being December 29, 2005. Ed wants to close the transaction in 2005 because certain beneficial tax consequences will result only if the transaction is closed prior to the beginning of 2006. Abby has offered to purchase the building with the closing date being January 2, 2006. The building has a $95,000 greater AMT adjusted basis. For regular income tax purposes, Celine expects to be in the... click for more

Substance over form and tax planning

1. What does substance over form mean? How would this doctrine be applied in a tax controversy? 2. For most businesses, does the time and money spent in tax planning pass the cost vs. benefit test? In other words, how valuable is tax planning? Can you think of an example of planning for a small business in the formation stage? For an individual, why is estate tax planning so important?

Tax Questions

1.A client asks your advice on the following situation. They are going to start a manufacturing company with two outside investors. The investors will be not be employees; your client will be a full-time employee and CEO. They want to know what form of business you recommend the company be. Compare the pros and cons of each business form along with your final recommendation. 2.What is basis? How is tax basis different from an asset in financial accounting? Is it possible to have a negative tax basis? Can you think of an example of negative basis?

Two cases: accrual basis of accounting for a PSC corp; alimony taxability for Karen and Al in the process of negotiating a divorce agreement.

(1) Your client is a new partnership, Aspen Associates, which is an engineering consulting firm. Generally, Aspen bills clients for services at the end of each month. Client billing are about $50,000 each month. On average, it takes 45 days to collect the receivables Aspen’s expenses are primarily for salary and rent. Salaries are paid on the last day of each month, and rent is paid on the first day of each month. The partnership has a line of credit with a bank, which requires monthly financial statements. These must be prepared using the accrual method. Aspen’s managing partner Amanda Sims, has suggested that the firm should also use the accrual method for tax purposes and that reduce acc... click for more

Taxation

This year, Mrs. Kurata’s corporate employer made a $8,300 cash contribution to her retirement savings plan. Her interest in the plan is fully vested, so she has the legal right to withdraw the contribution at any time. Describe the tax consequences of the contribution to Mrs. Kurata and to the corporate employer assuming the following. a. The plan is a qualified defined-contribution plan.b. The plan is a nonqualified savings plan.