Jamal purchased equipment and used materials to develop a patent. The development costs were deducted on prior returns. The b
Jamal purchased equipment and used materials to develop a patent. The development costs were deducted on prior returns. The bases and fair market values of the assets are presented below.
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Sarah has made an offer to purchase the assets. Under one plan, she would pay $200,000 now and $400,000 plus interest at 5% (the Federal rate) in one year. Alternatively, Jamal would incorporate the assets and then sell the stock to Sarah. Incorporating the assets would not be a taxable event to Jamal, and his basis in the stock would equal his basis in the assets of $100,000. The corporation's basis in the assets would also be $100,000, the same as Jamal's basis for the stock. Because the corporation would have a basis in the assets of less than the fair market value (and therefore, there would be less depreciation and amortization than with an asset sale by Jamal), Sarah would pay $200,000 in the current year but only $350,000, plus interest at 5%, in one year. Assume that Jamal's combined Federal and state marginal tax rate is 35% and his combined
In your computations, round the gross profit to four decimal places before converting to the percentage. (For example: .754788 would be rounded to .7548 and used as 75.48%.) Use rounded gross profit in subsequent computations. If required, round your final answers to the nearest dollar.
a. Jamal's recognized gain in the year of sale from the installment sale of his assets is $fill in the blank 637002ffdfc0ff9_1.
b. What are Jamal's after-tax net proceeds if he sells the assets? $fill in the blank dc031301efd6f81_1
What are Jamal's after-tax net proceeds if he sells the stock? $fill in the blank dc031301efd6f81_2
Assuming that Jamal's time value of money is 5%, he would prefer
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