10. RonisCEOofandowns100percentof WTEnterprises,acash- basis, calendar-year corporation. The company has always been profitable but over the lastfive years Ron's salary has increased from over $400,000 per year to over $1,000,000 and it has failed to pay dividends. Which of the following will not occurif the IRS determines that $500,000 of his salary is unreasonable? a. Ron will pay an additional tax on the $500,000 re-characterized as dividend. b. Ron willbe eligible for a refund of Medicare taxes. c. WT will lose a $500,000 deduction for the recharacterized dividend. d. WT will be eligible for a refund of aportion of FICA taxes paid.

Answered: 10. RonisCEOofandowns100percentof…

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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Mr. Stanhope has an MBA degree from Stanford University and has successfully operated a business for 18 years. The revenue agent who audited Mr. Stanhope's Form 1040 discovered a glaring error resulting in a $16,200 underpayment of tax. When questioned by the revenue agent about the error, Mr. Stanhope just shrugged and offered no logical explanation. Required: a. If the error resulted from Mr. Stanhope's blatant disregard of a tax rule, compute the penalty for negligence. b. Is Mr. Stanhope's level of education and business experience likely to be a factor considered by the revenue agent in determining negligence? Complete this question by entering your answers in the tabs below. Required A Required B X Answer is complete but not entirely correct. If the error resulted from Mr. Stanhope's blatant disregard of a tax rule, compute the penalty for negligence. Accuracy-related penalty $ 3,440 X Required A Required B >
1.(3)
The ABC company bought land 2 years ago for $20,000. The FMV, now is $24,000 the corporation still owes $15,000 on this purchase. The company makes a non liquidating distribution of this property to a stockholder who accepted the debt. What is the tax effect to the shareholder of receiving this distribution? A. This is no tax effect to an owner who receives a nonliquidating distribution B. Shareholder must recognize income of $9000 C. Shareholder must recognize income of $20,000 D. Shareholder must recognize income of $24,000
Five years ago, as the result of an examination of your client, Pachenko, the IRS assessed a $5000 tax liability, which remains unpaid. Which section and subsection of the internal revenue code defines the length of the period after assessment during which the IRD has to begin court proceedings to collect taxes? Enter your response in the answer field below IRS$
15.Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $200,000 in return for 50 percent of the corporation’s stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation’s stock: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) FMV Adjusted Tax Basis Building $ 75,000 $ 20,000 Land 175,000 80,000 Total $ 250,000 $ 100,000 To equalize the exchange, Wizard Corporation paid Hermione $50,000 in addition to her stock. What amount of gain or loss does Ron recognize on the formation of the corporation? Gain or loss recognized
RonisCEOofandowns100percentof WTEnterprises,acash- basis, calendar-year corporation. The company has always been profitable but over the last five years Ron’s salary has increased from over $400,000 per year to over $1,000,000 and it has failed to pay dividends. Which of the following will not occur if the IRS determines that $500,000 of his salary is unreasonable? a. Ron will pay an additional tax on the $500,000 re-characterized as dividend. b. Ron will be eligible for a refund of Medicare taxes. c. WT will lose a $500,000 deduction for the recharacterized dividend. d. WT will be eligible for a refund of a portion of FICA taxes paid.
Ganda sold 2,000 shares of a domestic corporation directly to a buyer Vice at P180 per share. The shares were 3 purchased 3 years ago for P105 per share. How much is the capital gains tax of the above transactions. Select the correct response: 54,000 90,000 22,500 Zero
Morris a single taxpayer earns wages of $350,000. In tax year 2021 he also owns a sole proprietorship with $210,000 of income and $480,000 of allowed deductions ( 270,000 dollar loss). Boris has enough tax basis to cover the loss as and is considered at risk for the loss amount and he materially participates in the activity. What is the amount of excess business loss he will carry forward $10,000 $80,000 $260,000 $270,000
a1
2. Ima Start sets up a corporation as its sole shareholder and contributes cash, divided as follows: $50,000 capital and $150,000 debt. Discuss possible tax consequences. 3. C corporation has maintained $500,000 from earnings without distributing a dividend. The IRS is challenging this. Discuss two options to avoid an accumulated earnings tax.
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18. Ron and Hermione formed Wizard Corporation on January 2. Ron contributed cash of $200,000 in return for 50 percent of the corporation’s stock. Hermione contributed a building and land with the following fair market values and adjusted tax bases in return for 50 percent of the corporation’s stock: (Leave no answer blank. Enter zero if applicable. Negative amount should be indicated by a minus sign.) FMV Adjusted Tax Basis Building $ 75,000 $ 20,000 Land 175,000 80,000 Total $ 250,000 $ 100,000 To equalize the exchange, Wizard Corporation paid Hermione $50,000 in addition to her stock. What is Hermione’s tax basis in the stock she receives in return for her contribution of property to the corporation?

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