Solved by verified expert :160. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest86
During the current year, Waterthrush Company had operating income of $510,000
and operating expenses of $400,000. In addition, Waterthrush had a long-term
capital gain of $30,000. How does Lucinda, the sole owner of Waterthrush
Company, report this information on her individual income tax return under
following assumptions?
a.
Waterthrush is a proprietorship, and Lucinda does not withdraw
any funds from the company during the year.
b.
Waterthrush is an LLC, and Lucinda does not withdraw any funds
from the company during the year.
c.
Waterthrush is an S corporation, and Lucinda does not withdraw
any funds from the company during the year.
d.
Waterthrush is a regular corporation, and Lucinda does not
withdraw any funds from the company during the year.
161. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest87
Beige Company has approximately $250,000 in net income in 2011 before deducting
any compensation or other payment to its sole owner, Janet (who is single).
Assume that Janet is in the 35% marginal tax bracket. Discuss the tax aspects
of each of the following arrangements. (Ignore any employment tax
considerations.)
a.
Janet operates Beige Company as a proprietorship.
b.
Janet incorporates Beige Company and pays herself a salary of
$150,000 and no dividend.
c.
Janet incorporates the company and pays herself a $150,000
salary and a dividend of $77,750 ($100,000 – $22,250 corporate income tax).
d.
Janet incorporates the company and pays herself a salary of
$250,000.
162. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest88
During the current year, Shrike Company had $220,000 net profit from
operations. Carlos, the sole owner of Shrike, is in the 35% marginal tax
bracket. Determine the combined tax burden for Shrike and Carlos under the
following two independent situations. (Ignore any employment taxes.)
a.
Shrike Company is a C corporation and all of its after-tax
income is distributed to Carlos.
b.
Shrike Company is a proprietorship and all of its after-tax
income is withdrawn by Carlos.
163. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest89
Canary Corporation, an accrual method C corporation, uses the calendar year for
tax purposes. Leticia, a cash method taxpayer, is both a shareholder of Canary
and the corporation’s CFO. On December 31, 2011, Canary has accrued a $100,000
bonus to Leticia. Describe the tax consequences of the bonus to Canary and to
Leticia under the following independent situations.
a.
Leticia owns 75% of Canary Corporation’s stock and the
corporation pays the bonus to Leticia on February 1, 2012.
b.
Leticia owns 75% of Canary Corporation’s stock and the
corporation pays the bonus to Leticia on April 2, 2012.
c.
Leticia owns 25% of Canary Corporation’s stock and the
corporation pays the bonus to Leticia on February 1, 2012.
164. CHAPTER
2—CORPORATIONS: INTRODUCTION AND OPERATING RULES Quest90
Ostrich, a C corporation, has a net short-term capital gain of $40,000 and a
net long-term capital loss of $180,000 during 2011. Ostrich also has taxable
income from other sources of $1 million. Prior years’ transactions included the
following:
2007 net short-term capital gains
$60,000
2008 net long-term capital gains
35,000
2009 net short-term capital gains
15,000
2010 net long-term capital gains
40,000
a.
How are the capital gains and losses treated on Ostrich’s 2011
tax return?
b.
Determine the amount of the 2011 net capital loss that is
carried back to each of the previous years.
c.
Compute the amount of capital loss carryover, if any, and
indicate the years to which the loss may be carried.
d.
If Ostrich were a proprietorship, how would Ellen, the owner,
report these transactions on her 2011 tax return?
