Roxi owns 500 shares of common stock in the Big Wheeler Corporation. She is pleased to learn that the companyearned a very nice profit over the most recent operating period. The company has announced that it will pay eachshareholder a dividend of $1 per share out of its after-tax profits. Because Big Wheeler has already paid corporate taxeson this profit, this dividend payout will represent tax-free income for Roxi and this is also called whatO Yes taxes have already been paid and its called single payoutO No, she still owes taxes and it's called double taxationO No, she still owes taxes and it's called Capital gains taxO Yes, it's tax free and called double exemption

An investment made in the equity shares of a corporation provides various benefits to the investor…

Answered: Roxi owns 500 shares of common stock in…

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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1.) The client inherited stocks from their grandfather when he passed away. Their grandfather bought half of them a month ago for $100,000 and they are now worth $150,000. The other half was purchased two years ago for $250,000 and they are now worth $500,000. The client wants to sell them tomorrow - what will the tax consequences be?
ces The following salaried employees of Mountain Stone Brewery in Fort Collins, Colorado, are paid semimonthly. Some employees have union dues or garnishments deducted from their pay. You do not need to complete the number of hours. Required: Calculate their net pay using the percentage method for manual payroll systems with Forms W-4 from 2020 or later in Appendix C to determine federal income tax. Assume box 2 is not checked for any employee. Include Colorado income tax of 4.55 percent of taxable pay. No employee has exceeded the maximum FICA limit. Note: Round your intermediate calculations and final answers to 2 decimal places. Employee S. Bergstrom C. Pare L. Van der Hooven S. Lightfoot Filing Status, Dependents MJ-0 MJ-2 (<17) S-1 (Other) MJ-0 $ $ $ $ Pay Union Dues per Period 1,820 3,740 $ 3,465 $ 3,090 120 240 Garnishment per Period $ $ $ 50 75 100 Net Pay
5
Ms. Jones owns all of the shares of Jones Co. She has had the company valued and 50% of the shares are worth $100,000. She is going to sell to her husband 50% of her shares for $100,000 cash. She intends to report the gain on her tax return and have her husband pay tax on any dividends paid by the company. Does this work? Comment.
Samantha lives under an imputation tax system. Her income tax rate is 35%, which applies to all of her income, including wages, interest income and dividend income. Samantha owns 2000 shares of Rio Inc. which has 3.2 billion shares outstanding and taxable income of $1.8 billion (in the current year). Rio’s pays corporate tax rate at 30% and its payout ratio in the past has been 80%. Rio has just announced that it will maintain the past payout ratio and all dividends (to be paid next month) will be fully franked. Given this information, if Samantha had lived under a classical tax system, which of the following is closest to the additional tax she would have to pay as a Rio shareholder? a.$220.50 b.$146.25 c.$175.50 d. None of the other answers e.$45.00
Helen holds 1,000 shares of Fizbo Incorporated stock that she purchased 11 months ago. The stock has done very well and has appreciated $20/share since Helen bought the stock. When sold, the stock will be taxed at capital gains rates (the long-term rate is 15 percent and the short-term rate is the taxpayer's marginal tax rate). Ignore the time value of money. a. If Helen's marginal tax rate is 35 percent, how much would she save by holding the stock an additional month before selling? Tax savings b. What might prevent Helen from waiting to sell? Helen bears if she holds the stock for an additional month. The stock price could substantially if there is market volatility or if the company encounters financial difficulties. In addition, Helen may be selling the stock for which she may be unwilling to wait.
Sahara is an enterprising young woman (age 14). Her math tutoring service will generate $8,400 this year. She has her prior taxed earnings ($7,500) invested in a convertible bond fund that will generate 5% interest and 6% capital gains this year. How much of her income is taxable?
Kim and Kayne have been dating for years and are now thinking about getting married. As a financially sophisticated couple, they want to think through the tax implications of their potential union. a. Suppose Kim and Kanye both earn $65,000 (so their combined income is $130,000). Using the tax bracket information Data table (Click the icon here in order to copy the contents of the data table below into a spreadsheet.) TABLE 1.2: Federal Income Tax Rates and Brackets for Individual Returns (2018) Tax Rates Taxable Income Taxes 10.0% $0 to $9,875 10% of taxable income 12.0% $9,876 to $40,125 $987.50, plus 12% of the amount over $9,876 22.0% $40,126 to $85,525 $4,617.50, plus 22% of the amount over $40,126 24.0% $85,526 to $163,300 $14,605.50, plus 24% of the amount over $85,526 32.0% $163,301 to $207,350 $33,271.50, plus 32% of the amount over…
Andrea would like to organize SHO as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 11% annual before-tax return on a $200,000 investment. Andrea’s marginal income tax rate is 35% and her tax rate on dividends and capital gains is 15%. Andrea will also pay a 3.8% net investment income tax on dividends and capital gains she recognizes. If Andrea organized SHO as an LLC, Andrea will be required to pay an additional 2.9% for self-employment tax and an additional 0.9% for the additional Medicare tax. Further, she is eligible to claim the full deduction for qualified business income. Assume that SHO will pay out all of its after-tax earnings every year as a dividend if it is formed as a C corporation.a. How much cash after taxes would Andrea receive from her investment in the first year if SHO is organized as either an LLC or a C corporation?b. What is the overall tax rate on SHO’s income in the first year if…
Lena is the sole shareholder and president of Gold Corporation, which is a C Corporation. She feels that she can justify paying herself a $50,000 bonus this year because of her excellent performance for the company. However, rather than a bonus, she considers having Gold pay her a $50,000 dividend. She believes this would be preferable because it will be taxed at only 15% as a “qualified dividend” instead of being taxed at her marginal income tax rate of 35% as a bonus. Assuming that Gold Corporation is in the 21% federal tax bracket, how much federal income tax could Lena save by taking the bonus?Given that Lena owns 100% of Gold Corporation you should analyze this decision from both the corporation and individual tax perspectives (an “integrated” analysis). You can ignore any state or social security tax considerations. Reminder: dividends paid by a C Corporation are nondeductible for federal income tax purposes.
Please help me with e and f. Thanks!
Leona, whose marginal tax rate on ordinary income is 37 percent, owns 100 percent of the stock of Henley Corporation. This year, Henley generates $1 million of taxable income. If Henley wants to pay all of its after-tax earnings to Leona as a dividend, calculate the amount of the dividend payment. Calculate Leona’s tax due on the dividend computed in part a, and her after-tax cash flow from the dividend receipt. Compute the combined corporate and individual tax burden on Henley’s $1 million of current year income, and the effective combined tax rate on this income.

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