This year, the shareholders in Sunflower Company can choose between receiving an additional 1,000 shares of stock or cash of $1000. Sunflower's shareholders will be taxed on the distribution if Sunflower has sufficient E&P. True or False

This year, the shareholders in Sunflower Company can choose between receiving an additional 1,000 shares of stock or cash of $1000. Sunflower's shareholders will be taxed on the distribution if Sunflower has sufficient E&P. True or False

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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Corporations are taxed on the income they earn, and shareholders are taxed on the dividends they receive. What provisions in the tax law reduce this "double tax" burden? (Assume the year is 2018.) C O A. Dividends received by individuals are taxed at lower rates than other income. There is no tax on dividends received by individuals in the 10% tax bracket. Dividends received by individuals in the 12% through 35% brackets are taxed at 15% while individuals in the 37% tax bracket are taxed at 20%. In addition, eligible corporations can elect to be treated much like partnerships. The income of these so-called "S corporations" is reported by shareholders, and is not taxed to the corporation. In addition, corporations receiving dividends from other corporations are eligible to claim a dividend-received deduction that varies between 50% and 100% of the dividends received depending on the percentage of stock owned. There are no provisions in the tax law to reduce the "double tax" burden.…
2.
El Toro Corporation declared a common stock distribution to all shareholders of record on June 30, 20x3. Shareholders will receive 1 share of El Toro stock for each 2 shares of stock they already own. Raoul owns 330 shares of El Toro stock with a tax basis of $73 per share. The fair market value of the El Toro stock was $112 per share on June 30, 2023. What are the tax consequences of the stock distribution to Raoul? Multiple Choice ___ $0 dividend income and a tax basis in the new stock of $112 per share. ___ $0 dividend income and a tax basis in the new stock of $72 per share. ___ $0 dividend income and a tax basis in the new stock of $48 per share. ___ $18,480 dividend and a tax basis in the new stock of $112 per share.
Silver, Incorporated was incorporated in 2019 and adopted a calendar year for tax purposes. Here is a schedule of Silver's taxable income for 2019 and 2020. 2019 2020 Ordinary income $100,000 $150,000 Net capital gain 0 5,000 Taxable income $100,000 $155,000 In 2021, Silver generated $300,000 ordinary income and recognized a $15,000 net capital loss. Assuming a 21% corporate tax rate, which of the following statements is CORRECT? Silver can deduct its $15,000 net capital loss only on a carryforward basis. Silver can carry the $15,000 net capital loss back to 2020 and receive a $3,150 refund. Silver can deduct $3,000 of the $15,000 capital loss against its 2021 ordinary income and receive a $630 tax savings. Silver can carry $5,000 of the $15,000 net capital loss back to 2020 and receive a $1,050 refund.
Jose, who is in the 35 percent marginal tax bracket with a 15 percent tax rate on dividends, owns 100 percent of the stock of JJ, Incorporated. This year, JJ generates $545,000 taxable income and pays a $108,000 dividend to Jose. Compute his tax on the dividend under each of the following assumptions: Required: a. The federal tax rules currently in effect apply to the dividend payment. b. The federal tax system has been amended to allow shareholders to gross up dividend income by the corporate tax paid with respect to the dividend and credit this tax against their individual tax. Complete this question by entering your answers in the tabs below. Required A Required B Compute his tax on the dividend assuming the federal tax system has been amended to allow shareholders to g dividend income by the corporate tax paid with respect to the dividend and credit this tax against their individua Tax on the dividend
PS Swim Inc has a year end of November 30. It is a small CCPC. For its 2019 taxation year, its income tax return is due on Qulz naw of Select one 1011 O a February 28, 2020. b. May 31, 2020. Frish OC. April 30, 2020. Tl O d. None of the above O e. January 31, 2020. The balance due date for a corporation is: Select one O a April 30 ot the following year. Ob The same as the tiling deadiine. Oc. Two months after the end of the fiscal year, or three months after the end of the fiscal year if the corporation is a small CCPC O d. Three months after the end of the fiscal year, or two months after the end of the fiscal year if the corporation is a smal CCPC
During the year, CDE Corporation earned enough profits to pay dividends to its shareholders. CDE is a C corporation. What are the tax consequences of this distribution? (a) The corporation will increase their earnings and profits by the amount distributed. (b) The corporation will reduce its taxable income by the amount distributed to the shareholders. (c) The corporation will pay a flat tax of 21% on the amount distributed. The shareholders also include their dividends received in taxable income. (d) There are no direct tax consequences for either the corporation or the shareholders.
For the following independent cases, determine whether economic income is present and, if so, whether it must be included in gross income (i.e., is it realized and recognized for tax purposes?). Note: Leave no answers blank. Enter zero if applicable. Required: Asia owns stock that is listed on the New York Stock Exchange, and this year the stock increased in value by $15,250. Ben sold stock for $10,500 and paid a sales commission of $210. Ben purchased the stock several years ago for $4,200. Bessie is a partner in SULU Enterprises LLC. This year SULU reported that Bessie's share of rental income was $2,850 and her share of municipal interest was $800.
Sandra would like to organize LAB (a legal corporation) as either an S corporation or a C corporation for tax purposes. In either form, the entity is expected to generate an 8 percent annual before-tax return on a $1,075,000 investment. Sandra's marginal income tax rate is 37 percent and her tax rate on qualified dividends and net capital gains is 20 percent. LAB's income is not qualified business income (QBI), so Sandra is not allowed to claim the QBI deduction. Assume that LAB will distribute all of its earnings after entity-level taxes every year. Ignore the additional Medicare tax and the net investment income tax when computing your answers. Note: Round your intermediate computations to the nearest whole dollar amount. a. How much cash after taxes would Sandra receive from her investment in the first year if LAB is organized as either an S corporation or a C corporation? b. What is the overall tax rate on LAB's income in the first year if LAB is organized as an S corporation or as…
Bulldog Corporation reported taxable income of $510,000 this year, before any deduction for any payment to its sole shareholder and employee, Georgia Brown. Bulldog chose to pay a bonus of $146,000 to Georgia at year-end. The bonus meets the requirements to be "reasonable" and is therefore deductible by Bulldog. Georgia is subject to a marginal tax rate of 35 percent on the bonus. What is the income tax imposed on the corporate income earned by Bulldog and the income tax on the bonus paid to Georgia? Corporate tax Shareholder tax Total income tax
Forward Corporation is owned by a group of 15 shareholders. During the current year, Forward pays $550,000 in salary and bonuses to Alvin, its president and controlling shareholder. The corporation's tax rate is 21%, and Alvin's marginal tax rate is 37% for ordinary income and 23.8% (20% + 3.8% on net investment income) for long-term capital gains. The IRS audits Forward's tax return and determines that reasonable compensation for Alvin is $350,000. Forward agrees to the adjustment. Read the requirement. Requirement What effect does the disallowance of part of the salary and bonus deduction have on Forward's and Alvin's respective tax positions? Ignore payroll taxes, such as FICA. Print Done X