Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 18, Problem 11DQ
To determine
Explain the tax accounting complications in the event of E and the corporation became partners.
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Which of the following is correct? 1 It would be cheaper for ABCL to own and pay for the insurance policies because the corporate earnings in a small business corporation like ABCL are sheltered from tax, therefore the funds required to pay the insurance premiums could come out of completely tax-free corporate earnings. 2 It would be cheaper for ABCL to own and pay for the insurance policies because the company can deduct the premiums paid as a business expense, while the individuals would have to pay the premiums with after-tax dollars. 3 It would be cheaper for ABCL to own and pay for the insurance policies because a portion of corporate earnings in a small business corporation like ABCL are only taxed at around the 20% marginal rate, therefore lesser pre-tax corporate earnings would be required to generate the necessary after-tax funds to pay the insurance premiums.
(A) 1 only.
(B) 2 and 3 only.
(C) 1 and 2 only.
(D) 3 only.
Select the best answer.
Which of the following statements regarding various entities is true?
O
O
O
A. A business entity with only one owner is classified as a corporation or is disregarded.
ion Q 10
B. A disadvantage of a pass-through entity is double taxation.
C. By default, an eligible entity that has a single member will be treated as a limited partnership.
Partnerships are taxpaying entities, because tax attributes pass through to the individual
partners.
O D.
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a. What amount of gain or loss does BLI recognize if the transaction is structured as a stock sale to Amy and Brian? What amount of corporate-level tax does BLI pay as a result of the transaction?
b. What amount of gain or loss does Ernesto recognize if the transaction is structured as a stock sale to Amy and Brian?
Chapter 18 Solutions
Individual Income Taxes
Ch. 18 - Prob. 1DQCh. 18 - Prob. 2DQCh. 18 - Prob. 3DQCh. 18 - Prob. 4DQCh. 18 - Prob. 5DQCh. 18 - Prob. 6DQCh. 18 - Prob. 7DQCh. 18 - LO.2 In 2019, the taxpayer became ineligible to...Ch. 18 - LO.2 Osprey Corporation, an accrual basis...Ch. 18 - Prob. 10DQ
Ch. 18 - Prob. 11DQCh. 18 - Prob. 12DQCh. 18 - LO.2 Emerald Motors is an automobile dealer. The...Ch. 18 - Prob. 14DQCh. 18 - Prob. 15DQCh. 18 - Prob. 16DQCh. 18 - Prob. 17DQCh. 18 - LO.4, 7 In December 2019, Carl Corporation sold...Ch. 18 - LO.2, 5 What are the similarities between the crop...Ch. 18 - Prob. 20DQCh. 18 - Prob. 21DQCh. 18 - Prob. 22DQCh. 18 - LO.6 Largo Company is an engineering consulting...Ch. 18 - Prob. 24DQCh. 18 - Prob. 25DQCh. 18 - Prob. 26DQCh. 18 - Prob. 27CECh. 18 - LO.2 Gaffney Corporation is a wholesale...Ch. 18 - Prob. 29CECh. 18 - LO.2 In 2019, Chaya Corporation, an accrual basis,...Ch. 18 - Prob. 31CECh. 18 - Prob. 32CECh. 18 - Prob. 33CECh. 18 - Prob. 34CECh. 18 - Prob. 35CECh. 18 - Prob. 36CECh. 18 - Prob. 37CECh. 18 - Prob. 38CECh. 18 - Prob. 39PCh. 18 - Prob. 40PCh. 18 - Prob. 41PCh. 18 - In 2018, Juan entered into a contract to write a...Ch. 18 - Prob. 43PCh. 18 - Compute Marys income or deductions for 2019 using...Ch. 18 - What accounting method (cash or accrual) would you...Ch. 18 - Blue Company, an architectural firm, has a...Ch. 18 - How do the all events and economic performance...Ch. 18 - Ross Company is a C corporation providing property...Ch. 18 - Prob. 49PCh. 18 - Prob. 50PCh. 18 - Floyd, a cash basis taxpayer, has received an...Ch. 18 - Prob. 52PCh. 18 - Prob. 53PCh. 18 - On June 30, 2019, Kelly sold property for 240,000...Ch. 18 - Prob. 55PCh. 18 - Prob. 56PCh. 18 - Prob. 57PCh. 18 - Prob. 58PCh. 18 - Prob. 59PCh. 18 - Ostrich Company makes gasoline storage tanks....Ch. 18 - Prob. 61PCh. 18 - Grouse Company is a furniture retailer whose...Ch. 18 - Lavender Manufacturing Company began business in...Ch. 18 - Silver Creek Ranch LLC is a small, family-owned...Ch. 18 - In 2019, Gail changed from the lower of cost or...Ch. 18 - At the end of 2020, Magenta Manufacturing Company...Ch. 18 - Prob. 67PCh. 18 - Prob. 68PCh. 18 - Prob. 69PCh. 18 - Prob. 1RPCh. 18 - Prob. 2RPCh. 18 - Prob. 3RPCh. 18 - Paula has sales that qualify to be reported on the...
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- Select the best answer. Which of the following statements regarding various entities is true? O O O A. A business entity with only one owner is classified as a corporation or is disregarded. Question Q 10 B. A disadvantage of a pass-through entity is double taxation. C. By default, an eligible entity that has a single member will be treated as a limited partnership. Partnerships are taxpaying entities, because tax attributes pass through to the individual partners. O D. Submit Answers 100% Completearrow_forward1. Which one of the following statements concerning a sole proprietorship is correct? The proprietorship pays taxes at the corporate tax rate. а. b. The ownership of the firm is easy to transfer to another individual. The ability to raise capital is limited by the owner's personal wealth. The company must pay income taxes separate from the taxes paid by the owner. с. d.arrow_forwardTwo people want to form a partnership and want to transfer business assets into the partnership. They are afraid of tax issues with the transfer what do you tell them?arrow_forward
- Select the best term for each definition below. Definitions Terms a. Shareholders can lose no more than the amount they invest in the company. b. Corporate earnings are taxed twice—at the corporate level and individual shareholder level. c. Like an S corporation, but there are no limitations on the number of owners as in an S corporation. d. Traces the line of authority within the corporation. e. Allows for legal treatment as a corporation, but tax treatment as a partnership. f. Has stock traded on a stock exchange such as the New York Stock Exchange (NYSE). g. The first time a corporation issues stock to the public. h. Describes (a) the nature of the firm’s business activities, (b) the shares to be issued, and (c) the composition of the initial board of directors.arrow_forward1. When do owners of a partnership get the tax benefit of claiming apartnership business loss? What does the partnership entity do with the loss? 2. When do owners of a corporation get the tax benefit of claiming a corporate business loss? What does the corporate entity do with the loss?arrow_forwardIf you were starting a business, what tax considerations might cause youto prefer to set it up as a proprietorship or a partnership rather than as acorporation?arrow_forward
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