ACCT 540 Research Project 2FactsKen and Marilyn Hert started a business in 1998 in an S corporation form. Ken is 72 years old andMarilyn is 70. The business struggled for many years but has now become very profitable.The Herts have two children, Fred, age 46, and Jessica, age 43. The children worked in the business whilein high school and college but then pursued their own interests. Three years ago Ken and Marilynbecame increasingly concerned about the ownership succession plan for the business. After discussingthe issue with their kids, they decided to make a gift of 10% of the company to each of the children. SoKen now owns 40%, Marilyn 40 %, Fred 10%, and Jessica 10%. The gifts were necessary to induce the kidsto begin working in the business with the objective of eventually turning over ownership to the kids.Ken and Marilyn are now comfortable with the idea of retiring and turning the business over to Fred andJessica. They propose to redeem their shares so that the two children own 100% of the company. Thebusiness is valued at $11.2 Million. Ken and Marilyn will receive $8,960,000 for their 80% interest. Thecorporation produces sufficient cash flow that Ken and Marilyn believe that their shares can bepurchased over 12 years.Corporate AAA is $3,560,000. Ken and Marilyn each have a tax basis in their shares of $1,400,000.RequiredPrepare a memo to Ken and Marilyn that addresses the tax consequences of a redemption of theirshares. If you believe there are alternative structures, you should address those and explain theconsequences of the alternatives identified. Recall that you can only cite primary authorities.

Redemption of Shares in S Corporation A shareholder of a Subchapter S corporation may sell his or…

Required Prepare a memo to Ken and Marilyn that addresses the tax consequences of a redemption of their shares. If you believe there are alternative structures, you should address those and explain the consequences of the alternatives identified. Recall that you can only cite primary authorities.

Required Prepare a memo to Ken and Marilyn that addresses the tax consequences of a redemption of their shares. If you believe there are alternative structures, you should address those and explain the consequences of the alternatives identified. Recall that you can only cite primary authorities.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Question Content AreaKrista is a CPA who helps her clients minimize their overall tax liability. What function is she performing? a. Tax evasion b. Tax planning c. Tax deferral d. Tax preparation
a) Should preference shares be disclosed as 'equity' or as 'debt'? Response Click or tap here to enter text. b) 'Income tax shall be paid on taxable income times tax rate. It makes sense to pay income tax for current year, but we should not be asked to account for deferred tax assets and liabilities'. Do you agree with this statement? Discuss your arguments. Response Click or tap here to enter text. c) The financial reports must provide a true and fair view. Discuss this term 'true and fair view' and give examples how a company can meet this requirement. Response Click or tap here to enter text. d) Briefly discuss under what circumstances a company may be wound up. Response Click or tap here to enter text. e) If an event occurs 'after the reporting period', then from the perspective of accounting standards, it is considered that the event has occurred between the 'end of the reporting period' and the 'date when the financial statements are authorised for issue'. What is the 'date when…
A tax preparer has a client tht recently asked him about the probability ofthe IRS detecting cash transactions not reported on tax return. What are some of the issues the tax preparer should discuss with this client?
Which of the following is an example of assurance engagement? Group of answer choices: Consulting and advisory engagements Examination Agreed-upon procedures Preparation of tax returns
Indicate whether the following statements are true or false. If the statementis false, explain why.d. The Tax Code encourages companies to pay a large percentage of theirnet income in the form of dividends.
A friend says to you, “I don’t understand how taxable temporary differences can be ‘liabilities’ and how deductible temporary differences can be ‘assets.’ It seems to me that these temporary differences relate only to the future and that accounting is based on ‘historical cost.’ In addition, the government frequently changes the tax laws, so no one knows what the future tax laws will be.” Required: Prepare a written response for your friend that explains why deferred tax assets and deferred tax liabilities are recognized and reported on a corporation’s balance sheet. Include a discussion of a valuation allowance.
Please choose one of the duties of a tax professional practicing before the IRS, discussed in the Treasury Department Circular 230 and: Describe the concepts and objectives of the duty. Discuss how a tax professional needs to conduct themselves in order to comply with the responsibility. Explain what kind of challenges and pressure an accountant could face in complying with the responsibility.
Which of the following is incorrect? A. Non-assurance engagement include agree-upon procedures, compilation of financial or other information and tax consulting B. Assurance service report on the quality of information C. All engagements perform by the professional accountant are assurance engagement D. Assurance engagement encompass attestation engagement
As a taxpayer referring to the information provided by your classmates related to the informational needs of the user group you have chosen, state whether the objectives of financial reporting they have listed meet your needs, whether any additional information is needed by your user group, and why this information would be beneficial to the financial decisions you would need to make. Are there any additional objectives that should be listed for your user group, if so what are they? How do your needs differ from the other user groups? how would I respond to the following: In reviewing the FASB concepts, I will address them from the school department point of view, which operates under the city government. Concept no.1 requires that financial statements help users to assess whether to donate to an organization, and to understand how (if they choose to donate) their resources will be used. For a school department it is imperative that the public know what their tax dollars are used for,…
please answer with reason
Self-employed individuals (including a partner in a partnership) and employees with other income sources are required to submit a return of income and estimated income on gazette forms as required by the Income Tax Act. Select one: True False
Please answer.am worried .I have attached a reference too.pls don't skip