Carol's difference in NPV of an investment at two different marginal tax rates

Carol wants to invest in a project that requires a $20,000 investment. She expects a before-tax return of $16,000 in years 1 through 3 from this investment. She uses a 6 percent discount rate for evaluation but is not sure if her marginal tax rate will be 15 percent or 25 percent. What difference does the marginal tax rate make in the after-tax net present value of this investment?

Wilma and Barney's tax transactions for the boat and the divorce

Wilma divorced Barney last year. This year she received the title to their boat that cost $45,000 and is now worth $55,000. Barney paid Wilma $1,500 per month, $500 for alimony and $1,000 for support of their two children. Wilma owed $60,000 to the bank for a loan on a failed business. To satisfy the debt, she transferred title of the boat to the bank and paid an additional $5,000. What are the tax consequences of these transactions for Barney and Wilma?

Federal Taxation and Gross Income Exclusions - Multiple Choice

Teresa sued her former employer for age, rage and gender discrimination. She claimed $250,000 in damages for loss of income and $500,000 in punitive damages. She settled the claim for $600,000. As a result of the settlement Teresa must include in gross income: a. 0$ b. $400,000 [$500,000/($250,000 + $500,000) x $600,000] c. $500,000 d. $600,000 e. None of the above. Malva collected $100,000 on her deceased husband's life insurance policy. The policy was purchased by the husband's employer under a group policy. Malva's husband had included $5,000 in gross income from the group term life insurance premiums during the years he worked for the employer. She elected to coll... click for more

Tax: shareholder loans, worthless stock, gain on contribution, termination, year end

In your own words please answer the following questions. References are acceptable but not for the entire document. 1. What are the major advantages of bona fide loans from shareholders and other debt instruments over stock? 2. What conditions need to be met to avoid IRS classification of loans from shareholders as equity (contributions to capital)? 3. What is the tax treatment of losses from worthless stock or securities? 4. What is the tax consequence if an eligible entity elects to change from being treated as a corporation to being treated as a partnership or proprietorship? 5. What IRS form needs to be prepared for an eligible entity to elect to be taxed as a corporation? ... click for more

Ordinary income, long-term capital gain, and short-term capital loss: Parrot Corp

During 2002, Parrot Corporation incurs the following transactions. Net income from operations $154,000 Long-term capital gain from sale of securities 66,000 Short-term capital loss from sale of securities 46,000 Parrot maintains a valid S election and does not distribute any dividends to its sole shareholder, Jamille. As a result, how much ordinary income, long-term capital gain, and short-term capital loss Jamille must recognize.