ACC 317 Week 1 Homework Chapter 17,18

This paper of ACC 317 Week 1 Homework Chapter 17,18 gives the solution to:Chapter 17: Corporations: Introduction and Operating Rules9 a. Tanagers taxable income for the year is $105,000 and their tax for the year is $24,200 b.Assuming Tanagers long-term capital gain was $15,000 and their short-term capital loss was still $40,000,Tanagers taxable income for the year would be $90,000 and their tax for the year would be $18,850 41. The maximum amount of expenditures that Egret can deduct in 2013 is $5,000 since these are considered startup expenditures. Egret would treat these costs the same way they would treat organizational expenditures in that they are able to expense the first $5,000 of the costs immediately and then amortize the remaining amount of $36,500 over a 180-month period. 42. Taxable Income Tax Liability Purple Corporation $65,000 $11,250 Azul Corporation $290,000 $96,350 Pink Corporation $12,350,000 $4,222,500 Turquoise Corporation $19,000,000 $6,670,000 Teal Corporation $130,000 $33,950 43. Seeing as the controlled group does not make an election regarding the apportionment of the marginal tax brackets, the tax liability for each corporation would be as follows: Red Corporation White Corporation Taxable Income - $130,000 Taxable Income - $200,000 Tax Liability - $33,950 Tax Liability - $61,250*Not electing to file a consolidated return they experienced a tax savings of $16,750.45. Sparrow Corporations taxable income for year 2013 is $257,300. Chapter 18: Corporations: Organization and Capital Structure Homework Submission32 a. Allie would have a gain of $350,000 under 357(c). However, under 357(b) Allie has boot of $475,000 due to the $100,000 cash that she borrows from Broadbill giving the lender a second mortgage. Because of this borrowed cash all liabilities that Allie has acquired are mnow considered boot, and she has boot of $475,000 which she must now claim. Consequently she has realized gain of $650,000 ($775,000 - $125,000 = stock of $300,000 + assumption of liabilities $475,000 -basis of land $125,000). Gain is recognized to the extent of the boot received of $475,000. Unfortunately for Allie, rule 357(b) predominates over rule 357(c). b. If Allie had not taken the $100,000 cash then the liabilities she assumed would not have been considered boot, and she would not have had as large of a gain to claim. Also, Broadbill would not have had a second mortgage, so would have assumed less, liabilities. 35 a. Jane recognizes income of $35,000 for the services that she renders to Osprey Corporation. b. Osprey Corporation has a basis of $25,000 in the property it acquires from Alice and a basis of $50,000 in the property it acquires from Jane. They also have a business deduction of $35,000 under 162 for the value of services rendered by Jane. 36 a. Red Corporation would not recognize any gain or income because the land and cash are viewed as a capital contribution. b. Red Corporation has zero basis in the land. c. The $800,000 building costs are applied against the cash borrowed and the $200,000 in inventory is also applied against the remaining $200,000 of the $1 million in cash so Red Corporation has zero basis in the building and the inventory. 39 a. Sam has an ordinary loss of $50,000 and then a long-term capital loss of $40,000. b. Kara would have a long-term capital loss of $40,000 because she is not the original holder she would not qualify for the ordinary loss treatment. 42. I feel that Purple Corporation has an acceptable debt-equity ratio because their fair market value of their assets is $300,000 to $600,000 creating a ratio of .5 to 1.