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- 3 Net Income. A calendar year S corporation has the following information for the current taxable year: Sales $180,000 Cost of goods sold. Dividend income Net capital loss Salary to Z. Life insurance for Z (70,000) 5,000 (4,000) 12,000 500 Other operating expenses Cash distributions to owners 40,000 20,000 Assume Z is single and her only other income is $30,000 salary from an unrelated employer. She is a 20% owner with a $10,000 basis in the S stock at the beginning of the year. Calculate the S corporation's net ordinary income and Z's adjusted gross income and ending basis in the S corporation stock.deductible)? 73. Nicole organized a new corporation. The corporation began business on April 1 of year 1. She made the following expenditures associated with getting the corporation started: Expense Attorney fees for articles of incorporation February 10 March 1-March 30 wages March 30 March 1-March 30 rent March 30 Stock issuance costs April 1 April 1-May 30 wages May 30 Date Amount $32,000 4,500 2,000 20,000 12,000 a) What is the total amount of the start-up costs and organizational expenditures for Nicole's corporation? b) What amount of the start-up costs and organizational expenditures may the corporation immediately expense in year 1 (excluding the portion of the expenditures that are amortized over 180 months)? c) What amount can the corporation deduct as amortization expense for the organizational expenditures and for the start-up costs for year 1 [not including the amount determined in part (b)]? d) What would be the total allowable organizational expenditures if Nicole…Robin Corp. had the following in 2020: Taxable Income: $330,000 Federal income tax: $69,300 Interest on state gov’t (muni) bond: $5,000 Interest on corporate bond: $10,000 Meals expense (total): $3,000 Key person life insurance premiums: $3,500 Key person life insurance proceeds: $130,000 Ordinary & necessary business expenses $250,000 Dividends (from a less-than-20%-owned US corp.): $35,000 What is Robin Corp.’s current E&P? Assume that there is no cash surrender value on the life insurance policy?
- Check my work Kaiwan, Inc., a calendar year S corporation, is partly owned by Sharrod, whose beginning stock basis is $32,000. During the year, Sharrod’s share of a Kaiwan long-term capital gain (LTCG) is $5,000, and his share of an ordinary loss is $18,000. Sharrod then receives a $20,000 cash distribution. Compute the following. What is Sharrod’s new basis in the Kaiwan stock? Beginning Basis 32000 Add Long -term cap gain 5000 Less Distribution -20000 Deductible loss -17000 Basis in stock 0 Stock basis is 0Heron Corporation is a personal service corporation. It had $230,000 of net active income, $40,000 of portfolio income, and a $250,000 passive loss during the year. How much is Heron’s taxable income for the year? a. $20,000. b. $40,000 c. $270,000 d. $520,000Your employer asks you to consult on the better approach to a decision. What should the corporation pay for an asset that will return them $150,000 at the end of year 1, then zero in year 2, then $400,000 in years 3 & 4, then zero in year 5, then $200,000 in years 6-10, assuming their discount rate is 3% (ignoring taxes) ?
- 1. Which of the following nominal rates does not apply to a C corporation? a. 10% b. 15% c. 25% d. 35% 2. Which of the following is never included in gross income? a. Loss on stock sale b. Social security benefits c. Gifts d.Unemployment benefits 3. What is George’s gross income if he has the following: Salary = $78,000; Dividends = $4,000; interest on city of San Francisco bonds = $2,000; a gain of $14,000 on a stock sale and a $4,000 loss on a small sole proprietorship that he owns. a. $78,000 b. $84,000 c. $92,000 d. $96,000 4. Azure Corporation (a C corporation) sold $100,000 of merchandise for which it paid $40,000. It also paid $35,000 of other expenses. All transactions were in cash. What is Azure’s Corporation’s after-tax net cash inflow? a. $21,250 b. $25,000 c. $60,000 d. $100,000 5. Koral Corporation can invest in a project that costs $400,000. The projectisexpectedtohaveanafter-taxreturnof$250,000ineachof years 1 and 2. Koral normally uses a 10 percent discount rate to…III. Problems 1 RFBT Exercise Explain or state briefly the rule or reason for your answers. 1. A contract was entered into in the name of the corporation with the unanimous approval of all the stockholders. Is the contract binding on the corpora- tion? 2. X, a director in a corporation, is recorded in the book of the corporation as owner of one (1) share of stock. X admits that the true owner is Y, its President. Is X disqualified to be a director? 3. A vacancy occurs in the board of directors, fur- ther reducing the number from 11 to 6 members. Who is empowered to free the vacancy, the stockholders or the incumbent directors? 4. X was elected director in a corporation. The other directors who supported his election, assured hir a monthly compensation of P50,000. In fact, they approved a resolution granting him the compensation. Is X entitled to the compensation?WFO Corporation has gross receipts according to the following schedule: Year 1 $21.00 million Year 2 $25.00 million Year 3 $23.00 million Year 4 $28.50 million Year 5 $29.00 million Year 6 $25.00 million If WFO began business as a cash-method corporation in Year 1, in which year would it have first been required to use the accrual method?
- On January 2, Chaz transfers cash of $165,800 to a newly formed corporation for 100% of the stock. In its initial year, the corporation has net income of $41,450. The income is credited to the earnings and profits account of the corporation. The corporation distributes $12,435 to Chaz. If an amount is zero, enter "0". a. How do Chaz and the corporation treat the $12,435 distribution? Chaz has a of $ and the corporation has a deduction of $ b. Assume, instead, that Chaz transfers to the corporation cash of $82,900 for stock and cash of $82,900 for a note of the same amount. The note is payable in equal annual installments of $8,290 and bears interest at the rate of 6%. No distributions are made during the year to Chaz. However, at the end of the year, the corporation pays an amount to meet the loan obligation (i.e., the annual $8,290 principal payment plus the interest due). Determine the total amount of the payment and its tax treatment to Chaz and the corporation. The corporate…26. Craig received a $25,000 distribution from Yellow Corporation that the corporation identified as $15,000 dividend and $10,000 return of capital. What effect does this distribution have on Craig's taxable income if his basis in the stock of Yellow is $8,000? a. Increase of $25,000 b. Increase of $17,000 c. Increase of $15,000 d. Increase of $10,000Select the best answer. Which item of income has been constructively received by an individual taxpayer? O O O A. An increase in the value of stock owned estion Q 13 B. A check received for payment of services, but which has not yet been deposited C. Wages earned the last week of December but not paid until January of the following year O D. A line of credit available, but not yet drawn on Submit Answers 95% Complete