Ms. Singh, who is in the 37 percent tax bracket, owns a residential apartment building that generates$86,000 annual taxable income. She plans to create a family partnership by giving each of her twochildren a 15 percent equity interest in the building. (She will retain a 70 percent interest.) Ms. Singh willmanage the building, and value of her services is $16,000 per year.Required:If Ms. Singh's children are in the 12 percent tax bracket, compute the tax savings from this income-shiftingarrangement. (Ignore any payroll tax consequences.)Answer is complete but not entirely correct.Tax savings from this income-shifting arrangement$ 7,712

Tax means the compulsory payment made to government. Income tax is levied on the income earning…

Answered: Ms. Singh, who is in the 37 percent tax…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Bruce and Amanda are married during the tax year. Bruce is a botanist at Green Corporation. Bruce earns a salary of $56,000 per year. Green Corporation has an accountable reimbursement plan. During the year, Bruce has $5,000 of employee expenses. Green Corporation reimburses Bruce for only $4,000 of expenses.Bruce decides to put $5,500 into a Traditional IRA. Amanda owns a financial consulting firm as a sole proprietor (it qualifies as a full trade or business). Amanda generates $80,000 of revenues during the year. She has the following business payments associated with her firm:● Utilities: $2,000● Office Rent: $14,000● Self-Employment Tax: $5,000● Salary for her secretary: $20,000● Fines/Penalties: $8,000● Payroll Taxes (Employer Portion): $1,000● Business Meals: $2,000● Bribe to police officer to forgive parking violation $1,500Due to the income and expenses above, Amanda has $39,500 of Qualified Business Income. Also, during the year a tornado damaged the roof of their personal…
Orie and Jane, husband and wife, operate a sole proprietorship. They expect their taxable income next year to be $450,000, of which $250,000 is attributed to the sole proprietorship. Orie and Jane are contemplating incorporating their sole proprietorship. (Use the tax rate schedule.) a) Using the married-joint tax brackets and corporate tax rate, find out how much current tax this strategy could save Orie and Jane. b) How much income should be left in the corporation?
Check my work. Bill and Mary filed a joint Federal income tax return this year. Mary owns a 30% interest in MAJIC Partnership, a women’s dress boutique. Mary’s share of the partnership’s net income is $280,000. Her shares of the partnership’s W–2 wages and unadjusted basis of depreciable property are $100,000 and $300,000, respectively. Mary’s share of the partnership income is $280,000 * 20% = $56,000 50% of W-2 wages is $100,000*.5= $50,000 25% of W-2 wages plus 2.5% of adjusted basis of depr prop = $100,000 * 25% +$300,000 * 2.5% =$32,500 The QBI deduction is $50,000 per the limitation phase What is the maximum QBI deduction if MAJIC’s income was from qualified services and Bill and Mary’s total taxable income was $450,000? The QBI deduction can be used for qualified service businesses only if the taxable income before the QBI deduction does not exceed the threshold. Since MAJIC’s…
Sam and Sung are equal joint owners in a property which they rent out. Because Sam is unemployed, he spends more time at the property to help do maintenance and gardening. Because Sung earns $200,000 per year from his job as an accountant, they come to a private agreement to divide the annual rent of received from their tenants, as follows: Sam will receive a salary payment of $20,000, after which the remainder will be split 60% in favour of Sam and 40% in favour of SungDuring the 2020 tax year, they incurred the following expenses on the property which they hope to claim as deductions: Council rates: $3,000Land Tax: $12,000Bank interest on the loan taken out to finance the purchase of the property: $80,000Required: If the total rent received for the 2020 tax year was $177979 calculate Sam's Assessable Income (assuming he has no other income sources).
riana and John, who file a joint return, have two dependent children, Kai and Angel. Kai is a freshman at State University, and Angel is working on her graduate degree. The couple paid qualified expenses of $3,000 for Kai (who is a half-time student) and $6,400 for Angel. Required: What are the amount and type of education tax credits that Ariana and John can take, assuming they have no modified AGI limitation?
Ms. Kona owns a 10 percent interest in Carlton LLC. This year, the LLC generated $66,400 ordinary income. Ms. Kona’s marginal tax rate is 32 percent, and she does not pay SE tax on her LLC income. Required: Compute the tax cost on Ms. Kona’s share of Carlton’s income assuming that she received a $29,000 cash distribution this year. Compute the tax cost on Ms. Kona’s share of Carlton’s income assuming that she received no cash distribution this year.
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Ms. Zhao has $200,000 private activity municipal bond interest income from The City of Indianapolis. Ms. Zhao's only other income for the year is her $600,000 salary and Mr. Zhao has a $400,000 salary. Furthermore, both Ms. and Mr. Zhao, married, are 50 years old, file a joint return, have no dependents, and have $27,000 itemized deductions. Compute the Zhao's tentative minimum tax for the current year.
Trey has two dependents, his daughters, ages 14 and 18, at year-end. Trey files a joint return with his spouse. What amount of child tax credit (either as a child or a qualifying dependent) will Trey be able to claim in 2022 for his daughters under each of the following alternative situations? Use Exhibit 8-8. Required: His AGI is $109,200. His AGI is $433,000. His AGI is $421,400, and his daughters are ages 10 and 12.
Mrs. Franklin, who is in the 37 percent tax bracket, owns a residential apartment building that generates $110,000 annual taxable income. She plans to create a family partnership by giving each of her two children a 20 percent equity interest in the building. (She will retain a 60 percent interest.) Mrs. Franklin will manage the building, and value of her services is $30,000 per year. If Mrs. Franklin's children are in the 12 percent tax bracket, compute the tax savings from this income-shifting arrangement. (Ignore any payroll tax consequences.) Tax savings from this income-shifting arrangement
Mr. Esposito, a petroleum engineer, earns an $53,000 annual salary, while Mrs. Esposito, a homemaker, has no earned income. Under current law, the couple pays 20 percent in state and federal income tax. Because of recent tax law changes, the couple’s future tax rate will increase to 28 percent. If Mrs. Esposito decides to take a part-time job because of the rate increase, how much income must she earn to maintain the couple’s after-tax disposable income? (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

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