South-western Federal Taxation 2018: Individual Income Taxes
41st Edition
ISBN: 9781337385886
Author: William H. Hoffman, James C. Young, William A. Raabe, David M. Maloney, Annette Nellen
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 18, Problem 27CE
a.
To determine
Determine the amount of salary D must receive during October 1 through December 31, 2018.
b.
To determine
Determine the amount of limited deduction for salary, the corporation would eligible in the fiscal year ending on September 30, 2019, in order to retain the fiscal year.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
0
Required information
[The following information applies to the questions displayed below]
This year, Justin B's share of S corporation income includes $5,000 of interest income, $6,500 of dividend income, and
$45,000 of net income from the corporation's professional service business activity.
a. Assume that Justin B. materially participates in the S corporation. How much of his S corporation income is potentially subject to the
net investment income tax?
S-Corporation income subject to net investment income tax
30.
Which of the following statements is CORRECT in regard to compensation expense paid to non-shareholders for an
accrual-basis corporation?
O The corporation may not deduct an excess of $1 million per employee per tax year
If the compensation amount is considered excessive, it may be reclassified as a dividend.
O The corporation may deduct all amounts earned by the employees in the current taxable year as long as it is paid within two and
one-half months after the taxable year-end.
31. Which one of the following statements describes the bad-debt deduction for a corporation?
O The deduction allowed for a specific bad debt is equal to its fair market value
Corporations are allowed a deduction for partial worthlessness of bad debts, but only to the extent the debt has been charged
off.
O if a receivable is not collected by a cash-method corporation, a bad-debt deduction is allowed.
32 Which one of the following statements concerning taxes reported on Form 1120 is CORRECT?
O Federal…
For the following questions, assume that after electing S corporation status Barry and Winnie had a change of heart and filed an election to terminate Omniocular's S election, effective August 1, 2025.
In 2025, Omniocular reported the following income or expense items:
January 1—July 31, 2025 (212 days)
August 1—December 31, 2025 (153 days)
January 1—December 31, 2025
Sales revenue
$ 80,000
$ 185,000
$ 265,000
Cost of goods sold
(40,000)
(20,000)
(60,000)
Salaries to Barry and Winnie
(60,000)
(40,000)
(100,000)
Depreciation expense
(7,000)
(2,000)
(9,000)
Miscellaneous expenses
(4,000)
(3,000)
(7,000)
Interest income
6,000
5,250
11,250
Overall net income (loss)
$ (25,000)
$ 125,250
$ 100,250
For tax purposes, how would you recommend Barry and Winnie allocate income between the short S corporation year and the short C corporation year if they would like to minimize double taxation of Omniocular's income?
Assume in part (f) that Omniocular allocates income…
Chapter 18 Solutions
South-western Federal Taxation 2018: Individual Income Taxes
Ch. 18 - Prob. 1DQCh. 18 - Prob. 2DQCh. 18 - Prob. 3DQCh. 18 - Prob. 4DQCh. 18 - Prob. 5DQCh. 18 - Prob. 7DQCh. 18 - Prob. 8DQCh. 18 - Prob. 9DQCh. 18 - Prob. 10DQCh. 18 - Prob. 12DQ
Ch. 18 - LO.2 Emerald Motors is an automobile dealer. The...Ch. 18 - Prob. 14DQCh. 18 - Prob. 15DQCh. 18 - Prob. 16DQCh. 18 - Prob. 17DQCh. 18 - Prob. 18DQCh. 18 - LO.2, 5 What are the similarities between the crop...Ch. 18 - Prob. 20DQCh. 18 - Prob. 21DQCh. 18 - Prob. 22DQCh. 18 - LO.6 Largo Company is an engineering consulting...Ch. 18 - Prob. 24DQCh. 18 - Prob. 25DQCh. 18 - Prob. 26DQCh. 18 - Prob. 27CECh. 18 - Prob. 28CECh. 18 - Prob. 29CECh. 18 - Prob. 30CECh. 18 - Prob. 31CECh. 18 - Prob. 32CECh. 18 - Prob. 33CECh. 18 - Prob. 34CECh. 18 - Prob. 37CECh. 18 - Prob. 39PCh. 18 - Prob. 40PCh. 18 - Prob. 41PCh. 18 - Prob. 42PCh. 18 - Prob. 43PCh. 18 - Prob. 44PCh. 18 - Prob. 45PCh. 18 - Prob. 46PCh. 18 - Prob. 47PCh. 18 - Prob. 48PCh. 18 - Prob. 49PCh. 18 - Jeffrey Boyd, the president of Eagle Furniture...Ch. 18 - Floyd, a cash basis taxpayer, has received an...Ch. 18 - Prob. 52PCh. 18 - Prob. 53PCh. 18 - Prob. 54PCh. 18 - Prob. 55PCh. 18 - Prob. 56PCh. 18 - Prob. 57PCh. 18 - Prob. 58PCh. 18 - Ostrich Company makes gasoline storage tanks....Ch. 18 - Prob. 61PCh. 18 - Grouse Company is a furniture retailer whose...Ch. 18 - Lavender Manufacturing Company began business in...Ch. 18 - Silver Creek Ranch LLC is a small, family-owned...Ch. 18 - Prob. 65PCh. 18 - Prob. 66PCh. 18 - Prob. 67PCh. 18 - Prob. 68PCh. 18 - Ven Company is a retailer. In 2018, its before-tax...Ch. 18 - Prob. 1RPCh. 18 - Prob. 2RPCh. 18 - Prob. 4RPCh. 18 - Paula has sales that qualify to be reported on the...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- 9. Norman incorporates the Bates Motel Corporation on February 1, 20x1. The corporation begins its business operations on July 1, 20x1. The corporation is on the calendar year for tax purposes. On February 1, 20x1, the corporation pays $20,000 to its attorney to draft the corporate bylaws. Assuming the corporation files its 20x1 tax return on time and makes a valid election, the corporation’s 20x1 deduction for the $20,000 in costs is (within a couple of dollars of): A. $5,500 B. $5,833 C. $5,916 D. $6,000 E. $20,000 F. None of the above (some other number is correct)arrow_forwardA28arrow_forwardWhich of the following statements is true of corporations in 2021? Select one: a. Capital losses of a corporation may be deducted from ordinary income, subject to an annual limitation. b. A corporation may deduct organizational expenditures as they are incurred. c. If a corporation has a long-term capital loss that is carried back, it is treated as a short-term capital loss d. Income of all corporations is taxed in the same way that income of partnerships is taxed.arrow_forward
- Am. 112.arrow_forwardMa1. Carl Carlson, a single taxpayer, owns 100% of Delta Corporation. During 2021, Delta reports $150,000 of taxable income. Carl reports no income other than that earned from Delta, and Carl claims the standard deduction. a) What is Delta's income tax liability assuming Carl withdraws none of the earnings from the C Corporation? What is Carl's income tax liability? What is the total tax liability for the corporation and its shareholders? b) Assume that Delta instead distributes $80,000 of its after-tax earnings to Carl as a dividend in the current year. What is the total income tax liability for the C Corporation and its shareholder? c) How would your answer to Part a change if Carl withdrew $80,000 from the business in salary? Assume the corporation pays $6,120 of Social Security taxes on the salary, which it can deduct from the $150,000 taxable income amount in Part a. Carl also pays $6,120 of Social Security taxes on the salary, which he cannot deduct. d) How would your…arrow_forwardAssume the following year 2 income statement for Johnstone Corporation, which was a C corporation in year 1 and elected to be taxed as an S corporation beginning in year 2. Johnstone's earnings and profits at the end of year 1 were $11,560. Marcus is Johnstone's sole shareholder, and he has a stock basis of $46,000 at the end of year 1. Johnstone Corporation Income Statement December 31, Year 2 Year 2 (S Corporation) $ 174,000 ( 41,000) (66,000) (56,500) (10,000) ( 4,600) 12,540 $ 8,440 Sales revenue Cost of goods sold Salary to owners Employee wages Depreciation expense Miscellaneous expenses Interest income Overall net income What is Johnstone's accumulated adjustments account at the end of year 2, and what amount of dividend income does Marcus recognize on the year 2 distribution in each of the following alternative scenarios? (Leave no answer blank. Enter zero if applicable.) c. Johnstone distributed $17,200 to Marcus in year 2. Accumulated adjustments account Dividend incomearrow_forward
- Assume the following year 2 income statement for Johnstone Corporation, which was a C corporation in year 1 and elected to be taxed as an S corporation beginning in year 2. Johnstone's earnings and profits at the end of year 1 were $11,560. Marcus is Johnstone's sole shareholder, and he has a stock basis of $46,000 at the end of year 1. Johnstone Corporation Income Statement December 31, Year 2 Year 2 (S Corporation) $ 174,000 ( 41,000) ( 66,000) ( 56,500) (10,000) (4,600) 12,540 Sales r evenue Cost of goods sold Salary to owners Employee wages Depreciation expense Miscellaneous expenses Interest income Overall net income $ 8,440 What is Johnstone's accumulated adjustments account at the end of year 2, and what amount of dividend income does Marcus recognize on the year 2 distribution in each of the following alternative scenarios? (Leave no answer blank. Enter zero if applicable.) a. Johnstone distributed $7,200 to Marcus in year 2. Accumulated adjustments account Dividend incomearrow_forwardAssume the following year 2 income statement for Johnstone Corporation, which was a C corporation in year 1 and elected to be taxed as an S corporation beginning in year 2. Johnstone's earnings and profits at the end of year 1 were $11,560. Marcus is Johnstone's sole shareholder, and he has a stock basis of $46,000 at the end of year 1. Johnstone Corporation Income Statement December 31, Year 2 Year 2 (S Corporation) $ 174,000 ( 41,000) ( 66,000) (56,500) (10,000) ( 4,600) 12,540 $ 8,440 Sales revenue Cost of goods sold Salary to owners Employee wages Depreciation expense Miscellaneous expenses Interest income Overall net income What is Johnstone's accumulated adjustments account at the end of year 2, and what amount of dividend income does Marcus recognize on the year 2 distribution in each of the following alternative scenarios? (Leave no answer blank. Enter zero if applicable.) d. Johnstone distributed $27,200 to Marcus in year 2. Accumulated adjustments account Dividend incomearrow_forwardAssume the following year 2 income statement for Johnstone Corporation, which was a C corporation in year 1 and elected to be taxed as an S corporation beginning in year 2. Johnstone's earnings and profits at the end of year 1 were $11,560. Marcus is Johnstone's sole shareholder, and he has a stock basis of $46,000 at the end of year 1. Johnstone Corporation Income Statement December 31, Year 2 Year 2 (S Corporation) $ 174,000 ( 41,000) ( 66,000) ( 56,500) (10,000) ( 4,600) 12,540 $ 8,440 Sales r evenue Cost of goods sold Salary to owners Employee wages Depreciation expense Miscellaneous expenses Interest income Overall net income What is Johnstone's accumulated adjustments account at the end of year 2, and what amount of dividend income does Marcus recognize on the year 2 distribution in each of the following alternative scenarios? (Leave no answer blank. Enter zero if applicable.) b. Johnstone distributed $11,200 to Marcus in year 2. Accumulated adjustments account $ Dividend incomearrow_forward
- Birch Corporation, a calendar-year corporation, was formed three years ago by its sole shareholder, James, who has operated it as an S corporation since its inception. Last year, James made a direct loan to Birch Corporation in the amount of $6,350. Birch Corporation has paid the interest on the loan but has not yet paid any principal. (Assume the loan qualifies as debt for tax purposes.) For the year, Birch experienced a $29,800 business loss. What amount of the loss clears the tax-basis limitation, and what is James's basis in his Birch Corporation stock and Birch Corporation debt in each of the following alternative scenarios? Note: Leave no answer blank. Enter zero if applicable. 8. At the beginning of the year, James's basis in his Birch Corporation stock was $53,100 and his basis in his Birch Corporation debt was $6,350. Amount of loss clearing tax basis limitation Basis in stock Basis in debtarrow_forwardnku.3 answer must be in proper format or i will give down votearrow_forwardAa.9.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
What is Transfer Pricing for Small Businesses?; Author: Nomad Capitalist;https://www.youtube.com/watch?v=_Q6nN3s1Xjs;License: Standard Youtube License