CONCEPTS IN FED.TAX.,2020-W/ACCESS
CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN: 9780357110362
Author: Murphy
Publisher: CENGAGE L
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Chapter 2, Problem 53P
To determine

State the problems that might be faced by Person E with respect to office, furniture, and the computer.

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Bob Jones has a small repair shop that he has run for several years as a sole proprietorship. The proprietorship uses the cash method of accounting and the calendar year as its tax year. Bob needs additional capital for expansion and knows two people who might be interested in investing in the business. Õne would like to work for the business. The other would only invest. Bob wants to know the tax consequences of incorporating the business. His business assets include building, equipment, accounts receivable, and cash. Liabilities include a mortgage on the building and a few accounts payable, which are deductible when paid. Required: Write a memorandum to Bob explaining the tax consequences of the incorporation. As part of your memorandum examine the possibility of having the corporation issue common and preferred stock and debt for the shareholders' property and money.
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