Assignment Part 1:
Question 1: What is the current maximum tax rate applicable to qualified dividends received by individual taxpayers?
Question 2: The Jimbo Corporation distributed $200,000 this year to its shareholders. Although Jimbo Corporation has no earnings and profits this year, it had accumulated $400,000 of earnings and profits from prior years; will this $200,000 distribution be taxed to the shareholders as dividends?
Question 3: The Darling Corporation has $100,00 of current and accumulated earnings and profits. This year its sole shareholder, ZsaZsa, receives a $150,000 distribution. Her basis for the stock she owns is $30,000
a. How will Zsabe taxed on the first $100,000 of her distribution
b. Explain the tax treatment of the next $30,000of the distribution
c. How will ZsaZsa be taxed on the balance of $150,000 distribution ($20,000)
Assignment Part 2:
Question 1: What are the four characteristics that have traditionally distinguished a corporation from other business entities?
Question 2: What are the tax and nontax disadvantages of corporate status?
Question 3: For what reasons might a corporation elect to be taxed as an S corporation?
Question 4: What are the requirements for qualification as an S corporation?
Question 5: What is the general rule for transfer of appreciated property to a corporation?
Question 6: Jules forms the Crestwood Corporation and transfers the assets of his successful sole proprietorship to the corporation. The assets are worth $100,000 but have a basis of only $30,000. Jules receives $80,000 worth of stock and $20,000 in cash. Will Jules have to recognize any gain? Explain
Question 7: How are organizational expenses of forming a new corporation treated for tax purpose?
Question 8: Suppose that the IRS claims that the Roilo corporation is "thinkly capitalized". The IRS characterizes the payments on the corporation's bonds as dividend payments. Then the Roilo Corporation takes the case to court since this cauterization is unfavorable.
a. What are some of the factors the court would examine before disregarding the debt classification?
b. What is one rule of thumb applied by the courts with regards to debt-equity ratio?
Question 8: What are the steps in computing corporate taxable income?
Question 9: What types of business activities qualify for the deduction for "qualified production activities income?
Question 10: the Sacane Corporation has a net operating loss of $4,000 this year. In what years can Secane take advantages of the loss? Explain
Question 11: Arnold allwin the president of daffy defense corporation arranged a government contract that result in gross income to the corporation of $3 million. Explain weather the corporation is entitled to deductions for the following items"
a. $1 million salary to Arnold
b. $50,000 capital loss (the corporation has no capital gains for the year)
c. $10,000 charitable contribution to the American Red cross.
Question 12: Explain the purpose of the accumulated-earning tax, when it is imposed and the rate at which it is imposed.
Question 13: It has been suggested by a finical adviser that price corporation purchase $50,000 of key person cash value life insurance on the life of Preston Yukon, the firm's skilled operational vice president. For many years, earnings of the corporation have been substantial, but no dividends have ever been declared or paid. The corporation now has substantial cash it does not need for current operations or anticipated growth and the firm's CPA is fearful of an accumulated-earnings tax problem. Will the proposed purchase of cash value life insurance by Price Corporation aggravate its potential problem? Explain.
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