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 the corporate tax rate of 21 percent, find out how much current tax this strategy could save Orie and Jane. Current tax saved b. How much income should be left in the corporation? Income left

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 the corporate tax rate of 21 percent, find out how much current tax this strategy could save Orie and Jane. Current tax saved b. How much income should be left in the corporation? Income left

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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Check my work. 25 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. What is Bill and Mary’s maximum QBI deduction if their total taxable income is $300,000? Since their total taxable income is less than the threshold limit of $326,600, the deduction is calculated as 20%. $280,000 * 20% (QBI deduction) = $56,000 What is the maximum QBI deduction if Bill and Mary’s total taxable income is $450,000? Since $450,000 exceeds the threshold limit of $326,600, and above $100,000 over in the case of filing joint returns, the limitation phase is applicable.
Pepa Madrigal has operated a very successful bakery for 30 years, and has accumulated investment that earn annual interest income of $40,000. Her other income put her in the top income tax bracket for personal tax purposes. She has a son, Antonio who is 22 years old and currently has no income. Antonio's only personal tax credit is the personal tax credit. Determine the amount of federal income taxes that could be saved by transferring the interest earning investments to a trust with Antonio as the income beneficiary, assuming that the trust will be required to distribute all of its income each year.
Liam has a gross income of $120,000 and takes the standard deduction. 1) What are his total taxes due? 2) What is his marginal tax rate? 3) What is his effective tax rate? Round to the neared hundredth of a percent.
Pear, an individual, plans to start a small business, which will operate as a corporation. In year 0, she expects the corporation to generate an ordinary loss of $950,000. Subsequently, she expects the corporation to be profitable, and projects ordinary profit of $1.425,000 in year 1, and $2,375.000 in year 2. Pear's personal marginal tax rate on ordinary income is 37%. Assuming a corporate tax rate of 21% and a 10% discount rate, calculate the present value of expected tax costs on the business earnings for the first 3 years of operations if the business does not make an S corporation election Assume the excess business loss limitation does not apply. Round your discount rate calculations to three decimal places. O sas3,623 O $896,325 O $1.128,600 O $502.640
If Isabella Rodriguez is single and in the 22 percent tax bracket, calculate the tax associated with each of the following transactions. (Hint: Use the IRS regulations for capital gains in effect in 2018.) Treat each of the following cases as independent of the others. Tax savings should be preceded by a "-" sign. Round the answers to the nearest cent. She sold stock for $3,025 that she purchased for $2,500 3 months earlier. $ She sold bonds for $3,000 that she purchased for $2,500 3 years earlier. $ She sold stock for $3,080 that she purchased for $4,000 20 months earlier. Assume this to be the only Stock in Isabella's portfolio. $
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What Constitutes Income (LO. 1) Two Sisters is a partnership that owns and operates a farm. During the current year, the partnership raised and harvested hay at a cost of $20,000. It then traded half the hay for quarter horse breeding stock-young horses worth $30,000. Two Sisters fed the remainder of the hay to the horses, which were worth $50,000 at the end of the year. a. What is the tax consequence of the exchange? A of $ b. What amount can they deduct as current operating expenses from these transactions during the current year?: c. What is the basis of the horses at year-end? d. The partnership has income of $ from these transactions during the current year.
Suppose you are28 and married. You and your spouse file for income taxes jointly. You are in the 25% tax bracket. You are considering a few personal investment issues. Which one of the followings is likely to be the best investmentinyour 401 (k) account? _____ a. Municipal bonds b. 1-year Treasury notes c. Stock mutual funds d .Annuities
Robert and John are married and have 4 dependent children and earn a gross biweekly salary of $5,616. They will also make the following tax-deductible purchases: • Medical expenses: $6,462 • Educational expenses: $7,049 When they file their taxes jointly, what will their tax refund be? Use the following information: • Standard deduction for married couples: $25,100 • Biweekly allowance: $165.38 per person For your final answer proceed as: Annual Income Tax to be payed or refunded = Total Annual Withholding - Final Income Tax. If the couple has to pay the government, type the number with a negative sign. For example, -325. If the couple has to receive a refund from government, type the number without sign. For example, 325. Round your answer to the nearest dollar.