Tax Accounting Scenarios: 20 comprehensive corporate, partnership and LLC problems

Chapter 1 1. A taxable corporation faces a flat 35% marginal tax rate. What is the tax savings from an additional $100,000 deduction? A. $35,000 B. $100,000 C. –0- D. $65,000 2. A taxpayer will pay $50,000 at the end of Year 1 and also at the end of Year 2. Given a 5% discount rate, what is the present value of this payment, assuming it is tax deductible? A. $48,500 B. $50,000 C. $90,700 D. $92,950 Chapter 2 3. Terral Corporation and Acceta, Inc form a joint venture as LLC and each take a 50% interest in capital and profits in return for a equal cash contribution to the new LLC. According to Reg.301.7701, the new LLC will be classified by default as a: ... click for more

Taxation - Multiple choice

1. Parent Corporation owns 100% of the stock of Subsidiary Corporation, and they file on a consolidated basis. After the “Step 3 computation” of separate taxable income for the year, Parent Corporation had separate taxable income of $250,000 and Subsidiary Corporation had a separate taxable income of $150,000. The only “consolidated item” in the Step 4 calculation was for capital gains and losses. During the current year, Parent had a net capital gain of $75,000, while Subsidiary had a net capital loss of $(85,000) Based on the above information, what is consolidated taxable income (CTI)? A. $ 390,000 B. $ 400,000 C. $ 475,000 D. $ 315,000 2. Aztec, Inc. is a U.S. corporation that o... click for more

Investment - Call & Put Option and Short Sales

Your client owns a lot of AA stock with a very low cost basis. Your client is worried that the price of AA stock will drop over the next six months, but he doesn't want to sell his AA stock and incur a capital gain. What strategies can he use?

Transferring Land to Corporation - Tax Impacts and security to owner of land

Several entrepreneurs plan to form a corporation for purposes of constructing a housing development. Randall will be contributing the land for the project and wants more security than shareholder status provides. He is contemplating two possibilities: receive corporate bonds for his land, or take out a mortgage on the land before transferring it to the corporation. Comment on the choices Randall is considering. What alternatives can you suggest?

Taxation

Do you think there should be a nationwide internet sales tax as a way of reducing the federal income tax? Why or why not? What are the positives and negatives associated with any type of sales tax?