Omar, an individual in the 37% tax bracket, wants to shift some of his income to a new corporation in order to take advantage of the 21% corporate tax rate. Omar plans to avoid any tax on dividends by retaining all earnings within the corporation. Will Omar’s plan work? Discuss.
Q: Our biggest client is Trang Nguyen. Trang's only source of income is $40,000,000 of income from a…
A: Only source of income is $40,000,000 from a partnership Deduction $600,000 in property taxes. Net…
Q: Madden is a 100-percent owner of MD LLC (taxed as an S corporation). He works full time for MD and…
A: This case provides that Madden is a 100% owner of MD LLC ( taxed as an S corporation). and it works…
Q: Hello. I need help trying to figure out this problem. The answer to this problem is D. 19,920 but…
A: The following computations are done for Military Gear Incorporated.
Q: Business income allocations are subject to self-employment tax. Business income allocations are…
A: Since you posted a question with multiple subparts, we will solve the first three subparts for you.…
Q: Carrie, the president and sole shareholder of Energy Corporation, has earned a bonus of $100,000 for…
A: Formulas:
Q: Eduardo, a single taxpayer, has $80,000 of taxable income plus $25,000 income from tax-exempt bonds.…
A: Effective tax rate: Effective tax rate is the rate at which a person pays the taxes. This effective…
Q: My question is would Horace's tax liability on the $5000 gain on the sale of stock as ordinary…
A: Capital Gain Taxes According to Internal Revenue Service (IRS) there are two types of Capital gain…
Q: Sandra would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C…
A: Cash flow after taxes (CFAT) is a financial performance indicator that demonstrates a company's…
Q: Joe Doe just started a business. He wants the business income to flowdirectly to his own personal…
A: Limited liability company is the type of company which has features of a sole proprietorship and…
Q: e fo
A: Tax refers to the mandatory charge levied by the government over the income gained by an entity.
Q: Mable is a wealthy widow who has come to you for tax advice. She is in the 35 percent tax bracket.…
A: After-tax return=Tax-free interest rate1 - the taxpayer's tax rate=3.5%1-0.35=5.38%
Q: Nancy and her daughter, Kathleen, have been working together in a cattery called "The Perfect Cat."…
A: Tax is the liability paid to government and calculated on the income earned.
Q: How could Samuel have received better tax consequences?
A: IRA stands for individual retirement account used by the financial bodies in the USA. The main…
Q: Tom sold mutual shares he had owned 3 years so that he could use the proceeds to return to college.…
A: The capital gains will be treated long-term capital gains as they are held for more than 3 years.…
Q: Jorge and Anita, married taxpayers, earn $150,000 in taxable income and $40,000 in interest from an…
A: Federal income tax withholding: The amounts which the employer withheld from employees’ gross pay…
Q: Amanda would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C…
A: Tax Tax refers to mandatory obligations on any individual or entity by any government agency. There…
Q: Mr. Lion, who is in the 37 percent tax bracket, is the sole shareholder of Toto Inc., which…
A: Note: “Since you have posted a question with multiple sub-parts, we will solve the first three…
Q: Lois's expected share of income from an S corporation is $900,000. Lois's marginal tax rate on…
A: Ordinary Income: Ordinary income is generally described as pay other than long-haul capital…
Q: Moana is a single taxpayer who operates a sole proprietorship. She expects her taxable income next…
A: In US, the Corporations are taxed at flat rate of 21%.
Q: Melanie owns 25% of the stock of the Gimli Corporation. The tax rate on dividend income is 26%. If…
A: Melanie shareholding is 25% Tax rate on dividend income is 26% Total Dividend payment by Gimli is…
Q: Dennis is currently considering investing in municipal bonds that earn 6 percent interests, or in…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: Samantha lives under an imputation tax system. Her income tax rate is 30%, which applies to all of…
A: Samantha 's each income is chargeable @ 30% tax rate due to imputation tax…
Q: 3
A: Imputation tax system is to avoid double taxation. When a Corporate earns profit it pays…
Q: James, who is in the 35 percent marginal tax bracket with a 15 percent tax rate on dividends, owns…
A: Solution - Requirement A- James income falls under 35% bracket and Dividend income will be taxed at…
Q: Allen, Beth, and Charlie formed Brick Corporation. Allen and Beth each received one-third of Brick…
A: Preferred stock- Preferred stock, are shares of a corporation's stock with dividends that are…
Q: Jan has a 35% marginal tax rate and has already recognized a STCL of $12,000 and a LTCG of $10,000,…
A: Irrespective of the marginal tax rate, capital gain tax rate on collectibles/ antiques is 28%.
Q: Steve Forbes ran for U.S. president in 1996 and 2000 on a platform proposing a 17% flat tax, that…
A: 2016 Tax liability slab rate as follows:
Q: Is Scott’s donation of a substantive number of the company’s shares to Jenny valid? Why or why not?
A: No, it isn't right. Scott's activity is sketchy in this situation one should diminish the assessment…
Q: Explain the tax effect based on providing $180,000 per year for the client’s salary and $70,000 per…
A: Answer:- Any disbursement made by S- Corporation must be authorised in meeting of BOD. The…
Q: antha lives under an imputation tax system. Her income tax rate is 35%, which applies to all of her…
A: The companies pay dividend out of the net income and this is paid to shareholders but shareholder…
Q: Steve Forbes ran for U.S. president in 1996 and 2000 on a platform proposing a 17% flat tax, that…
A: Taxable income refers to that amount of individuals income or business which is used to calculate…
Q: Tonya, who lives in California, inherited a $100,000 State of California bond in 2021. Her marginal…
A: California Bond: Interest payment = 3.3% Interest is not subject to California Income tax. Most…
Q: Andrea would like to organize SHO as either an LLC (taxed as a sole proprietorship) or a C…
A: Solution Net income before tax = 240000*11% = 26400.
Q: Sherry just received a big promotion at the corporation. Last year her salary was $100,000, but due…
A: Salary is the payment made to the employee from the employer for the service provided by the…
Q: Andrea would like to organize SHO as either an LLC (taxed as a sole proprietorship) or a C…
A: a). i). If SHO organized as LLC :-After tax receipt for Andrea is $ 14007.40.a). ii). If SHO…
Q: What are the tax implications of allowing an investor to contribute $100,000 to my corporation for a…
A: The pros of allowing someone to invest from a tax perspective can be said to be to avoid tax that…
Q: Consider Taxpayers A and B who are in the same marginal tax bracket because of equal salaries. They…
A: Introduction Taxpayers must not include their capital gains in ordinary income, instead they must…
Q: You have a client, and they formed a corporation with 5 of their friends. All of the owners (all six…
A: A corporation is formed with 5 friends. All were required to put $50,000 1 owner is going to work…
Q: Scott requested Jenny to work with the Bureau of Internal Revenue (BIR) in further reducing the tax…
A: Tax means the charge which is levy by the government on the net income of individual or an…
Q: Craig owns a piece of land that he'd like to use in a new business. He will transfer the land into a…
A: Capital gain: Gain arising out of sale of capital asset is known as capital gain. It can be short…
Q: Andrea would like to organize SHO as either an LLC (taxed as a sole proprietorship) or a C…
A: LLC and C Corporation are two form of business which are taxed in different manners. LLCs are taxed…
Q: Steve Forbes ran for U.S. president in 1996 and 2000 on a platform proposing a 17% flat tax, that…
A: Under the flat tax rules therefore not the maintain the records of the claim to the deductions and…
Q: Steve Forbes ran for U.S. president in 1996 and 2000 on a platform proposing a 17% flat tax, that…
A: Tax is defined as the monetary charges or sum imposed on the taxpayer’s income by the government.…
Q: Which of the following statements, if any, is false? O An individual can get lower Federal tax rates…
A: Taxable income: It is the portion of the income on which individual or corporation is required to…
Q: Lily is the sole shareholder of Crimson Corporation (a C corporation). At a time when Crimson has a…
A: A non-liquidating distribution made by a business organization is: A dividend to the extent of…
Q: Steve Forbes ran for U.S. president in 1996 and 2000 on a platform proposing a 17% flat tax, that…
A: Definition: Under the flat tax rules therefore not the maintain the records of the claim to the…
Q: Jack Flubber, who owns Sons of Flubber Construction Co.,and runs it as a proprietorship, had gross…
A: Solution:- Calculation of advantageous for Jack Flubber to incorporate as a closely held…
Omar, an individual in the 37% tax bracket, wants to shift some of his income to a new corporation in order to take advantage of the 21% corporate tax rate. Omar plans to avoid any tax on dividends by retaining all earnings within the corporation. Will Omar’s plan work? Discuss.
Omar wants to shift some of his income to a new corporation to take advantage of the corporate tax rate. This means he wants to prevent taxation.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- Evaluate the three strategies reducing income, increasing deductions, and taking advantage of tax credits that you listed based on their overall effect on a person's tax situation (the amount of income taxes that the person will have to pay). Evaluate the ethical issues related to the payment of income taxes. in other words, if there is a legal tax-saving strategy available to a person who earns $50,000 per year, will it be ethical for the person to utilize this strategy in order to pay less tax? State how your answer to the previous question would change if the person were making $1,500,000.Explain the tax effect based on providing $180,000 per year for the client’s salary and $70,000 per year for his daughter’s salary if they withdraw cash from the business or pay dividends as appropriate. E. Justify the percentage of ownership the client’s daughter should have in the business based on the type of business entity recommended. Consider the tax law in reference to the recommendation and how the decision will affect the daughter’s tax return. Answer for a S-Corporation pleaseMr. Young operates a photography studio as a sole proprietorship. His average annual income from the business is $100,000. Because Mr. Young does not need the entire cash flow for personal consumption, he is considering incorporating the business. He will work as a corporate employee for a $40,000 annual salary, and the corporation will accumulate its after-tax income to fund future business expansion. For purposes of this case, assume that Mr. Young's marginal income tax rate is 32 percent and ignore any employment tax consequences. a. Assuming Mr. Young's sole proprietorship does not qualify for the QBI deduction, by how much would Mr. Young's annual tax burden increase or decrease by incorporating? b. Assuming Mr. Young's sole proprietorship qualifies for the 20% QBI deduction, by how much would Mr. Young's annual tax burden increase or decrease by incorporating? Complete this question by entering your answers in the tabs below. Required A Required B Assuming Mr. Young's sole…
- Mr. Young operates a photography studio as a sole proprietorship. His average annual income from the business is $100,000. Because Mr. Young does not need the entire cash flow for personal consumption, he is considering incorporating the business. He will work as a corporate employee for a $40,000 annual salary, and the corporation will accumulate its after-tax income to fund future business expansion. For purposes of this case, assume that Mr. Young’s marginal income tax rate is 32 percent and ignore any employment tax consequences. Required: Assuming Mr. Young's sole proprietorship does not qualify for the QBI deduction, by how much would Mr. Young's annual tax burden increase or decrease by incorporating? Assuming Mr. Young's sole proprietorship qualifies for the 20% QBI deduction, by how much would Mr. Young's annual tax burden increase or decrease by incorporating? Mr. Young's tax burden decrease or increase by ( ) NOTE: 25,400 is NOT the right answer.Nicole and Alex get together to form a new corporation, TBTM Inc. (The Better Tax Museum, a competitor to The Tax Museum). Nicole contributes a building that has a tax basis of $700,000 and a fair market value of $850,000 in exchange for 75% of the stock and $100,000 in cash. Alex contributes $250,000 cash for 25% of the stock. A. How much taxable gain does Nicole have in the transaction? B. What basis does TBTM Corp take in the building? C. What basis does Nicole take in the stock received? D.Joe Doe just started a business. He wants the business income to flowdirectly to his own personal tax return, but he wants to make sure that hehas limited liability. What form(s) of business ownership would you recommendfor Joe?
- Evaluate the ethical issues related to the payment of income taxes. in other words, if there is a legal tax-saving strategy available to a person who earns $50,000 per year, will it be ethical for the person to utilize this strategy in order to pay less tax? State how your answer to the previous question would change if the person were making $1,500,000.Kristen, the president and sole shareholder of Egret Corporation, has earned a salary bonus of $30,000 for the current year. Because of the lower tax rates on qualifying dividends, Kristen is considering substituting a dividend for the bonus. Assume that the tax rates are 24% for Kristen and 21% for Egret Corporation. Question Content Area a. How much better off would Kristen be if she were paid a dividend rather than salary? If Kristen were paid a bonus, she would receive $fill in the blank bcbd0cf5affa04c_1 22,800 after taxes. If Kristen receives a dividend rather than salary, she would receive $fill in the blank bcbd0cf5affa04c_2 25,500 after taxes. Thus, she would be better off by receiving the dividend . Feedback Area Feedback Closely held corporations have considerable discretion regarding their dividend policies. In the past, the double tax result provided strong motivation to avoid the payment of dividends. Instead, the incentive was to bail out corporate profits in a…Pear, an individual, plans to start a small business, which will operate as a corporation. In year 0, she expects the corporation to generate an ordinary loss of $1,650,000. Subsequently, she expects the corporation to be profitable, and projects ordinary profit of $2,475,000 in year 1, and $4,125,000 in year 2. Pear's personal marginal tax rate on ordinary income is 37 Assuming a corporate tax rate of 21% and a 10% discount rate, calculate the present value of expected tax costs on the business earnings for the first 3 years of operations if the business makes an S corporation election. Assume the excess business loss limitation does not apply. Round your discount rate calculations to three decimal places. $1,556,775 $1,482,599 $1,960,200 $873,015
- On creating a new 100 percent-owned corporation, Ben was advised by his tax consultant to treat 50 percent of the total amount that was invested as a loan and 50 percent as a purchase of corporate stock. What tax advantage does this arrangement have over structuring the entire investment as a purchase of stock? Explain.Mr. Chan set up a company called Good Home Limited. The company holds several properties in Hong Kong and lease out to earn rental income. Mr. Chan wonders whether the company should pay property tax or profits tax. He also concerns if double taxation of the same income derived from a property under property tax and profits tax will charge to GoodHome Limited and how it can avoid this if so. Question: Advise Mr. Chan.Scott requested Jenny to work with the Bureau of Internal Revenue (BIR) in further reducing the tax liability of the company believing her to be an accountant. Meanwhile, Jenny took advantage of Scott’s mistaken belief and trust and convinced him that he would reduce the company’s tax liability by 50% in exchange for a substantive number of shares in the company. Is Scott’s donation of a substantive number of the company’s shares to Jenny valid? Why or why not?