Your supervisor advises you to recommend that they form a LLP, a LLC, or a professional corporation.
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Mark and Marsha recently graduated from the Law School and want to start a general practice law firm together. Since they were friends for a long time and graduated at the top of their class, they are confident in each other’s ability to practice law. Each of them has about $20,000.00 to invest in the new law firm, and neither has any significant personal assets besides two secondhand cars from their law school days. They are unsure of how to form their business association, and they visit the consultancy company that you work for to learn about their options. Your supervisor advises you to recommend that they form a LLP, a LLC, or a professional corporation.
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- Beth and Bob are married entrepreneurs. Beth has a start-up sole proprietorship in which she works long hours. This year the business generated $500,000 of revenues and $800,000 of deductible business expenses. Bob is a partner in a new partnership, also working long hours. His share of the partnership loss for the year is $275,000. Fortunately, they both have trust funds so they are receiving $700,000 of taxable interest income and dividends in 2021. Due to this year's results, Beth and Bob will have an NOL carryover of a. $0. b. $575,000. c. $325,000. d. $51,000.Jeremy is thinking of starting up a small business selling NASCAR memorabilia. He asks his friend, Carmen, if she'd like to join him in setting up a partnership to start the business. What is one disadvantage in joining the partnership that Carmen should consider? (A) Carmen should realize that profits in the partnership will be reduced by dividend payments to shareholders. B) Carmen should realize that, as an owner of the business, she will be personally responsible for the debts of the business. Carmen should realize that the profits of the business will also be taxed as dividend income, so she faces the potential for double taxation of that business income. D Carmen should realize that the Jeremy will have complete control over the business because it was his idea. CAnita and Duncan had been partners for many years in a mercantile business. Their relationship deteriorated to the point at which Anita threatened to bring an action for an accounting and dissolution of the firm. Duncan then offered to buy Anita’s interest in the partnership for $250,000. Anita refused the offer and told Duncan that she would take no less than $360,000. A short time later, James approached Duncan and informed him he had inside information that a proposed street change would greatly benefit the business and that he, James, would buy the entire business for $1 million or buy a one-half interest for $500,000. Duncan made a final offer of $350,000 to Anita for her interest. Anita accepted this offer, and the transaction was completed. Duncan then sold the one-half interest to James for $500,000. Several months later, Anita learned for the first time of the transaction between Duncan and James. What rights, if any, does Anita have against Duncan?
- which type of organization should be formed. Rob and Bran want to form a snow removal business. They are deciding between a general partnership and a limited liability company. Bran says it is important that the two have limited liability and do not pay corporate income taxes.Kate and Mark, a married couple, own a limited liability company. Although Kate and Mark are not yet ready to retire, they would like to begin involving their three children in the business since they are now all responsible adults. Their primary concern is ensuring that the business will remain in their family for future generations. It is also important to Kate and Mark that their children learn the value of a dollar, so they would like them to purchase their interests in the company. Kate and Mark have been successful in their business and have a modest estate, but they do not predict they will owe any estate tax. Which one of the following is the most appropriate form of business transfer technique for Kate and Mark to use to achieve their objectives? A)A preferred stock recapitalization of the business B)A gift of the business interests from Kate and Mark to each child C)A cross-purchase buy-sell agreement between Kate, Mark, and the children D)An entity…Bob and Jane, age 53 and 51, are physicians, each earning over $100,000 per year. Through years of prudent financial decisions and a commitment to saving money they have accumulated over $1,500,000 in assets, paid off their home, and have no outstanding debts. The couple's combined annual living expenses are $60,000, and they have planned their estate to reduce taxation to a minimum. Although Bob and Jane are not interested in life insurance, they want to learn more about long-term care insurance. Which of the following statements regarding their long-term care insurance needs are CORRECT?\\n\\nA)\\nPremiums paid by the individual are tax-deductible as a medical expense for itemized deduction purposes, subject to limitations based on the individual's age.\\nB)\\nMedicare covers only a maximum of 100 days of custodial nursing care, and only the first 20 days are covered 100%.\\nC)\\nIf the insured qualifies for a viatical settlement, the insured cannot exclude the gain from the sale of…
- Meg owns and operates a plastic manufacturing company, and Maynard is a teacher. Maynard and Meg’s principal is stock in the family business (Meg owns eighty percent of the stock and Maynard owns the other twenty percent); the business was recently appraised at $3.2 million. They have about $1 million in other assets, all jointly held. Meg has four children from a previous marriage: Tom (age 26, a lawyer), Martha (age 24, a manager in the family business), and twins Hal and Al, college students, age 20. Both Martha and Hal have indicated an interest in remaining with the family business.Neither Maynard no Meg has made any lifetime transfers. They desire for their children to inherit all their properties eventually. Since Meg is ten years older than Maynard, she would like to insure that he has enough income to live on should he survive her, and she also would like to ensure that her children receive the entire estate after he dies. They would also eventually like to leave a gift…Sandy and John Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2022, Sandy worked as a computer technician at a local university earning a salary of $152,100, and John worked part time as a receptionist for a law firm earning a salary of $29,100. Sandy also does some Web design work on the side and reported revenues of $4,100 and associated expenses of $800. The Fergusons received $820 in qualified dividends and a $205 refund of their state income taxes. The Fergusons always itemize their deductions, and their itemized deductions were well over the standard deduction amount last year. Use Exhibit 8-10, Tax Rate Schedule, Dividends and Capital Gains Tax Rates, 2022 AMT exemption for reference. The Fergusons reported making the following payments during the year: State income taxes of $4,425. Federal tax withholding of $21,000. Alimony payments to Sandy's former spouse of $10,050 (divorced 12/31/2014). Child support payments for Sandy's child with…In 2007, Gauldin and Corn entered into a partnership for the purpose of raising cattle and hogs. The two men were to share equally all costs, labor, losses, and profits. The business was started on land owned initially by Corn’s parents but later acquired by Corn and his wife. No rent was ever requested or paid for use of the land. Partnership funds were used to bulldoze and clear the land, to repair and build fences, and to seed and fertilize the land. In 2011, at a cost of $2,487.50, a machine shed was built on the land. In 2016, a Cargill unit was built on the land at a cost of $8,000. When the partnership dissolved in 2017, Gauldin paid Corn $7,500 for the “removable” assets; however, the two had no agreement regarding the distribution of the barn and the Cargill unit. Is Gauldin entitled to one-half of the value of the two buildings? Explain.
- Joe and Jessie are married and have one dependent child, Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer for a manufacturing firm, while Jessie runs a craft business from their home. Jessie's craft business consists of making craft items for sale at craft shows that are held periodically at various locations. Jessie spends considerable time and effort on her craft business, and it has been consistently profitable over the years. Joe and Jessie own a home and pay interest on their home loan (balance of $220,000) and a personal loan to pay for Lizzie's college expenses (balance of $35,000). Neither Joe nor Jessie is blind or over age 65, and they plan to file as married joint. Assume that the employer portion of the self-employment tax on Jessie's income is $658. Joe and Jessie have summarized the income and expenses they expect to report this year as follows: Income: Joe's salary Jessie's craft sales Interest from certificate of deposit…Sandy and John Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2023, Sandy worked as a computer technician at a local university earning a salary of $153,500, and John worked part time as a receptionist for a law firm, earning a salary of $30,500. Sandy also does some Web design work on the side and reported revenues of $5,500 and associated expenses of $1,500. The Fergusons received $1,100 in qualified dividends and a $275 refund of their state income taxes. The Fergusons always itemize their deductions, get the full benefit of deducting the entire amount of state income taxes paid, and their itemized deductions were well over the standard deduction amount last year. Use Exhibit 8-10, Tax Rate Schedule, Dividends and Capital Gains Tax Rates, 2023 AMT exemption for reference. The Fergusons reported making the following payments during the year: • State income taxes of $4,775. Federal tax withholding of $21,000. • Alimony payments to Sandy's former…Ten years ago, Valeria and Issac each invested $300,000 to create Xava Corporation. Xava develops and manufactures rock climbing and bungee jumping equipment. The business has become very profitable (it now is valued at $3,000,000), and Issac would like to cash out the profits and sell the business. Valeria, however, wants to reinvest the profits and expand the business into ice diving. Because they have different expectations, Valeria and Issac agree that the best solution is to divide up the company. Issac will receive the bungee division; Valeria, the rock climbing. After the reorganization, Issac sells his stock in the bungee division for $1,500,000 at the beginning of the current year. Valeria retains her ownership of the rock climbing division.. Valeria sells the rock climbing stock for $2,000,000 at the end of six years. Using a 7% discount factor, determine whether Issac or Valeria made a better decision. Assume a 20% tax rate on long-term capital gains. Determine the present…