1. Corp A wishes to acquire the business of Corp T. Corp T stock is worth $650 million, and its shareholderscumulatively have a tax basis of $300 million in the Corp T shares. Corp T has no debt, very little cash, and assets with acumulative tax basis of $100 million. Assume the Corp T shareholders don't want to pay tax on their gain. Whichtransactions are available in the following scenarios?a. Corp A is willing to use only its voting stock to acquire Corp Tb. Corp A wants to use its stock to acquire only 80% of Corp T, and pay cash for the rest, and it needs Corp T tocontinue in existence (due to valuable licenses Corp T holds)c. Corp A wants to acquire the assets of Corp T for itself and have Corp T go out of existenced.Corp A wants one of its subsidiaries to acquire the assets of Corp T

The acquisition is when one company wants to overtake or acquire another. If voting rights are to be…

Answered: 1. Corp A wishes to acquire the…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Which of the following statements is true regarding the dividends-received deduction? The dividends-received deduction is available for dividends received from foreign corporations. The dividends-received deduction is allowed to provide relief from triple taxation. Distributions received from S corporations are eligible for the dividends-received deduction. The stock can be held for only 30 days to be eligible for the dividends-received deduction.
Calculate Anaheim Corporation's excess net passive income tax in each of the following alternative scenarios: a. Passive investment income, $100,000; expenses associated with passive investment income, $40,000; gross receipts, $208,000; taxable income if a C corporation, $22,400; corporate Earnings and profit, $41,000. Excess net passive income tax??? b. Passive investment income, $100,000; expenses associated with passive investment income, $70,000; gross receipts, $208,000; taxable income if a C corporation, $5,600; corporate Earnings and profit, $41,000. Excess net passive income tax??? c. Passive investment income, $100,000; expenses associated with passive investment income, $40,000; gross receipts, $208,000; taxable income if a C corporation, $22,400; corporate Earnings and profit, $0. Excess net passive income tax???
a. What is the relative tax advantage of corporate debt if the corporate tax rate is TC=0.22, the personal tax rate on interest is TpD=0.37, but all equity income is received as capital gains and escapes tax entirely ( TpE=0 )? b. How does the relative tax advantage change if the company decides to pay out all equity income as cash dividends that are taxed at 10% ? Note: Do not round intermediate calculations. Round your answers to 4 decimal places.
Amy and Brian were investigating the acquisition of a tax accounting business, Bottom Line Incorporated (BLI). As part of their discussions with the sole shareholder of the corporation, Ernesto Young, they examined the company's tax accounting balance sheet. The relevant information is summarized as follows: (Leave no answer blank. Enter zero if applicable. Negative amounts should be indicated by a minus sign.) Ad justed Tax Basis $ 6,000 9,000 56,500 139,000 $ 210,500 PMV Appreciation Cash Receivables Building $ 6,000 9,000 113,000 239,000 ६ 367,000 56,500 100,000 $ 156,500 Land Total Payables Mortgage $ 12,000 132,000 $ 144,000 $ 12,000 132,000 $144,000 Total * The mortgage is attached to the building and land. Ernesto was asking for $493,000 for the company. His tax basis in the BLI stock was $150,000. Included in the sales price was an unrecognized customer list valued at $150,000. The unallocated portion of the purchase price ($120,000) will be recorded as goodwill. Assume Ernesto…
Charleston Corporation (CC) now operates as a "regular" corporation, but it is considering a switch to S Corporation status. CC is owned by 100 stockholders who each hold 1% of the stock, and each faces a personal tax rate of 24%. The firm carns $3,000,000 per year before taxes, and since it has no need for retained earnings, it pays out all of its earnings as dividends. Assume that the corporate tax rate is 34% and the personal tax rate is 24%. How much more (or less) spendable income would each stockholder have if the firm elected S Corporation status? a. $7,752 b. $2,472 $9.732 d $5,472 & $3,000
Credits are more valuable than deductions to a corporation because O only 50% of all deductions may be subtracted. deductions only apply to interest received on a municipal bond. O deductions are subtracted from income tax expense. credits are subtracted after the income tax expense has been computed. O credits are more valuable because they are the expenses of operating a business.
Amy and Brian were investigating the acquisition of a tax accounting business, Bottom Line Incorporated (BLI). As part of their discussions with the sole shareholder of the corporation, Ernesto Young, they examined the company’s tax accounting balance sheet. The relevant information is summarized as follows: Note: Leave no answer blank. Enter zero if applicable. Negative amounts should be indicated by a minus sign. FMV Adjusted Tax Basis Appreciation Cash $ 10,000 $ 10,000 Receivables 15,000 15,000 Building 100,000 50,000 50,000 Land 225,000 75,000 150,000 Total $ 350,000 $ 150,000 $ 200,000 Payables $ 18,000 $ 18,000 Mortgage* 112,000 112,000 Total $ 130,000 $ 130,000 * The mortgage is attached to the building and land. Ernesto was asking for $400,000 for the company. His tax basis in the BLI stock was $100,000. Included in the sales price was an unrecognized customer list valued at $100,000. The unallocated portion of the purchase price…
Marvel Corporation (a C-corporation) has the following operating profit for 2019 through 2021. Year 2019 2020 2021 Operating profit ($60,000) $30,000 $50,000 Assume the marginal tax rate is flat 21%. (1) Discuss the tax consequences in year 2019, 2020, and 2021, respectively. (2) Why does the tax law allow business taxpayers to carry the net operating loss (NOL)?
1)During the year, CDE Corporation earned enough profits to pay dividends to its shareholders. CDE is a C corporation. What are the tax consequences of this distribution? The corporation will increase their earnings and profits by the amount distributed. The corporation will reduce its taxable income by the amount distributed to the shareholders. The corporation will pay a flat tax of 21% on the amount distributed. The shareholders also include their dividends received in taxable income. There are no direct tax consequences for either the corporation or the shareholders. 20 Choose the response that correctly describes a guaranteed payment. A loan payment from the partnership to pay back a loan from a partner. A loan payment from the partner to pay back a loan from a partnership. A payment made to a partner from the profits of the partnership. A payment made to a partner without regard to the income of the partnership. 3)Which of the following expenses may a partnership…
Refer to the corporate marginal tax rate information in Table 2.3 . b-1 Compute the average tax rate for a corporation with exactly $335,001 in taxable income. Average tax rate % b-2 What is the average tax rate for a corporation with exactly $18,333,334? Average tax rate % c. The 39 percent and 38 percent tax rates both represent what is called a tax “bubble.” Suppose the government wanted to lower the upper threshold of the 39 percent marginal tax bracket from $335,000 to $216,000. What would the new 39 percent bubble rate have to be? (Round your answer to 2 decimal places. (e.g., 32.16)) Bubble rate %
Assume a firm has a net operating loss of $100. The statutory tax rate is 20%. Which of the below is correct? Select One: a.The firm will recognize a deferred tax liability of $20. b.The firm not recognize any deferred tax asset or deferred tax liability. c.The firm will recognize a deferred tax asset of $20. d.The firm will recognize a deferred tax liability of $80.
Which statement below is incorrect in relation to the taxation of companies? A.Companies are not entitled to a discount on capital gains B.Dividends paid by a company are included in the assessable income of resident shareholders C.The (flat) rate of tax for companies is 30% (unless entitled to a lower rate of corporate tax) D.Companies are entitled to a 50% discount in capital gains

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