Tax Planning Strategies-Business Entities

Save your answers in a Microsoft® Word® document and submit them to the Dropbox.
1. Monica Richards owns 80 percent of Hiko Corporation; the remaining shares are owned by her children. During the current year, Hiko’s gross receipts were over $300,000 and it paid a salary of $90,000 to Monica. If Hiko is a regular C corporation, the IRS may argue that the salary payment is too large. On the other hand, if Hiko is an S corporation, the IRS may argue that the salary payment is too small. Explain this paradox.
2. Marker Solutions is a security consulting company (considered a specialized service trade or business for Sec. 199a purposes) that reports the following in 2019:
Gross Consulting Fees Collected
$424,850
Expenses:
Office Rent:
$84,000
Supplies:
$19,121
Salaries to non-owner Employees
(3 @ $60,000 each)
$180,000
Other ordinary business expenses:
26,413
Reasonable compensation to owner (Judy Marker)
$30,000
Additional cash withdrawals by Judy Marker
$12,000
The employer portion of FICA taxes on wages paid was 7.65%. In addition, Federal and State Unemployment taxes were assessed and paid by Marker Solutions at a rate of 6% on the first $7,000 of earnings per employee. Judy Marker is 100% owner of Marker Solutions. She is married to Jay Marker, who earns a $40,000 salary (with $4,000 withheld for federal income tax purposes) as a W2 employee of a local grocery store. Judy and Jay take the standard deduction when filing their personal taxes. Judy made estimated federal tax payments totaling $16,000 during 2019.
Assuming that Marker Solutions is operated as a sole proprietorship, compute the following:
Self-employment income
Self-employment tax liability
Judy and Jay Marker’s federal taxable income
Judy and Jay Marker’s federal tax payment due (or overpayment to be refunded) with their MFJ 2019 income tax return
3. Refer to the facts presented in Problem 2. Now assume that Marker Solutions is operated as a C Corporation. The reasonable compensation to Judy Marker was paid in the form of W2 wages (of which $3,000 was withheld for federal income taxes) and therefore would be subject to the FICA and unemployment taxes at the corporate level. The estimated tax payments made were paid by and for the business. Compute the following under these assumptions:
Corporate taxable income
Corporate tax liability
Judy and Jay Marker’s federal tax payment due (or overpayment to be refunded) with their MFJ 2019 income tax return
4. Refer to the facts presented in Problem 2. Now assume that Marker Solutions is operated as an S Corporation. The reasonable compensation to Judy Marker was paid in the form of W2 wages (of which $3,000 was withheld for federal income taxes) and therefore would be subject to the FICA and unemployment taxes at the corporate level. The estimated tax payments made were paid by and for the Markers. Compute the following under these assumptions:
S Corporation ordinary income
S Corporation tax liability
Judy and Jay Marker’s federal tax payment due (or overpayment to be refunded) with their MFJ 2019 income tax return
Calculate the total tax assessed (including employment taxes, SE tax, corporate income tax, and individual tax) under Problem 2, Problem 3, and Problem 4 assumptions. What form of entity would you recommend to Judy Marker?
5. In filing its first tax return, Ella Corporation checked the “cost” box as to inventory method. At the end of the year, the cost and market value of inventories were the same. In year 2, the market value of the inventories dropped. Ella would like to use the “lower of cost of market” method. Ella argues that checking the “cost” box was a mistake, and that since they essentially applied the lower of cost or market method in year 1, they should be permitted to use the lower of cost or market method without asking for permission from the IRS. Do you agree? Cite a case and applicable Revenue Ruling to support your answer.
6. Marianna Diago, president of Handler Manufacturing Company, typically spends the first hour at work each day touring the factory, speaking to workers, and listening to complaints. Her remaining 7 hours at work are devoted to long-range planning and financing for the company. Should Handler treat a portion of Marianna’s salary as capitalizable Code Sec. 163A costs? Explain your answer. Should a portion of all other costs related to the president’s office (secretary salary, depreciation, supplies, etc.) be capitalized as Code Sec. 163A costs?

Tax Accounting

The business is considered a sole proprietorship for income tax purposes and represents Stella’s only source of income. In 2018, the
standard deduction amount was greater than Stella’s total itemized deductions. Stella does not have any available tax credits nor did she make any estimated tax payments for her 2018 tax return.
Stella reports her income and expenses from the business using the cash method. Stella’s automobile was used partially for business use and partially for personal use. She uses the IRS’ optional standard mileage rate to compute her car
expenses related to the business.
Stella has retained contemporaneous documentation for all cash receipts and disbursements and uses an app on her phone to accurately track her business-related mileage. She has summarized the results in the table below:
DescriptionAmountCash received in January 2018 for services performed in December 2017$2,000Cash received in 2018 for services performed in 2018$24,750Cash received in January 2019 for services performed in December 2018$2,250Pet-grooming supplies, leashes and squeaky toys (Stella does not personally own any pets)$600Accountant’s fees paid in January 2018 for Quickbooks services performed in December 2017 $50Accountant’s fees paid in 2018 for Quickbooks services performed in 2018$660Accountant’s fees paid in January 2019 for Quickbooks services performed in December 2018$60Business-related meals with current clients$900Business-related meals with prospective clients$540Meals with current clients who are also close friends with Stella (no business was discussed during the meals)$375Tickets to a local dog competition to entertain current clients (business was discussed during the show)$1,6002018 Vehicle Personal Property Taxes (Total)$5102018 Vehicle Mileage (Total)10,0002018 Vehicle Mileage (Business)4,0002018 Vehicle Mileage (Personal)6,0002018 Standard Mileage Rate$0.5451. How much net profit will Stella report on her 2018 Schedule C, Line 31?How much net profit will Stella report on her 2018 Schedule C, Line 31?
2.What is Stella’s 2018 adjusted gross income (“AGI”) that will be reported on Form 1040, Line 7? Round all calculations to 0 decimal places.
3.How much tax will Stella owe on her 2018 Form 1040, Line 22? Hint – her taxable income falls within the lowest tax bracket; therefore, her regular tax liability is simply 10% of taxable income. Round all calculations to 0 decimal places.

Accounting Tax

Employees receive a base salary in addition to occasional incentive awards (i.e. bonuses); the incentive awards are often in the form of noncash perks. The company also offers different forms of equity-based compensation to reward its highest performing employees.
Hunter does not itemize deductions, and he does not have any available tax credits or estimated tax payments. His employer withheld $23,668 from his paychecks for income tax withholding.
Hunter’s base salary for calendar-year 2018 was $101,350. He embarked on an all-expenses-paid 5-day Caribbean cruise in April 2018, which he received from his employer in lieu of a cash bonus. The cruise and related travel expenses would have cost Hunter $4,025 if had paid for the trip out-of-pocket. His employer agreed to give Hunter an extra $1,375 in cash to cover his tax liability on the value of the cruise (referred to as a “tax gross-up”). Tax gross-up payments are included on an employee’s paycheck as ordinary wages subject to income and payroll taxes.
Hunter also took advantage of the following pre-tax payroll deductions:
Annual employee contribution to employer’s 401(k) qualified plan = 6% * $101,350 base salary = $6,081/year (his employer provides a 75% match as well, i.e. $4,560.75/year)
Annual employee contribution to a flexible spending account (“FSA”) = $2,400/year
Annual employee contribution to health insurance plan = $1,440/year
A summary of the above-mentioned compensation details is provided in the following table:
Description2018 AmountBase salary$101,350Non-cash incentive award – all-expenses-paid cruise vacation$4,025Tax gross-up for the non-cash incentive award$1,375Payroll deduction – Employee 401(k) contributions$6,081Payroll deduction – Employee FSA contributions$2,400Payroll deduction – Employee portion of insurance premiums$1,440Income taxes withheld from paychecks$23,668Hunter is a highly-valued engineer at the company and thus has been rewarded quite handsomely the past few years with several equity-based compensation awards. In 2018 Hunter decided to sell 4,360 shares of stock that he received pursuant to the terms of these awards.
Type of Equity Award Section 83(b) Election?Number of Options/Shares GrantedGrant DateFMV/share @ Grant (Exercise Price) Vest DateFMV/Share @ Vest Exercise DateFMV/Share @ Exercise Number of Shares SoldSale DateSales Proceeds per Share Restricted StockYes610 shares1/1/2016$9.501/1/2018$11.75 6105/1/2018$17.50Restricted StockNo950 shares1/1/2017$11.301/1/2018$11.75 9505/1/2018$17.50Restricted StockYes1,225 shares1/1/2018$11.751/1/2019$10.90 Nonqualified Stock Options 100 options – 7 shares per option1/1/2016$9.501/1/2017$11.301/1/2017$11.307005/1/2018$17.50Nonqualified Stock Options 200 options – 7 shares per option1/1/2017$11.301/1/2018$11.751/1/2018$11.751,4005/1/2018$17.50Incentive Stock Options 100 options – 7 shares per option1/1/2016$9.501/1/2017$11.301/1/2017$11.307005/1/2018$17.50Incentive Stock Options 200 options – 7 shares per option1/1/2017$11.301/1/2018$11.751/1/2018$11.75 In addition to his base salary, incentive award and equity-based compensation, Hunter also received the following taxable AND non-taxable fringe benefits from his employer during 2018:
Fringe BenefitDescriptionCompany’s Annual CostHunter’s Annual CostHealth insuranceThe company offers health insurance* to all employees. The monthly premium for each employee is $300, of which the company pays 60% and the employee pays 40% via a pre-tax payroll deduction.
*Hunter elected to receive health insurance coverage for 2018.
$2,160/year$1,440/yearAccidental death and dismemberment (“AD

internal audit

1. This is a management report expressing your supported opinion based on the business situation/problem/issue presented to you in the case study. The question will help you address the problem and answers to those questions should be embedded within your case or in exhibits.
2. Use Tables and Exhibits to present quantitative analyses. Where possible, use Tables and Exhibits to present calculations and quantitative analyses. You will be evaluated on the clarity of the presentation as well as the quality of the analysis. Font in Exhibits must be 10-point or larger; 12 point is preferable. This means the printed font (be careful if you use the “size” command!). Ensure that your exhibits have clear labels and that you have referred to each of the exhibits in the text. Do not have an exhibit that is NOT mentioned within the text of the report.
3. Don’t put case exhibits within the narrative portion of your case analysis.
4. Support your assertions with evidence drawn from case facts and your analysis.
5. Calculations are only the beginning of the analysis. You must interpret them and assess their managerial implications and significance for the decisions under discussion. Don’t be misled that your goal is just to solve the accounting problem. While you are expected to solve the accounting problem that is presented to you, don’t just solve the accounting problem; solve the business problem (the big picture) go beyond the obvious.
6. Include Cover Page which includes your name, case name, and the due date. Do not put your name on any other pages of your paper, including Exhibits.
7. The report should be double-spaced, in 12-point font. Number each page sequentially (including Exhibits) except the cover page. Narrative cannot not exceed two pages.
8. Run your spell-checker program. Proofread your paper. Look up rules of grammar/punctuation about which you are unclear. Make sure you know the difference between “it’s” and “its”. Use these two words correctly.
9. Do not copy lengthy portions of assigned articles or text into your papers. I am interested in your work, not someone else’s. Further, your case analysis must explain events in a specific context. The text and readings, on the other hand, provide general explanations not necessarily relevant to the specific case context.
10. If you briefly reference the work of others (including assigned readings), you MUST ACKNOWLEDGE THE SOURCE using appropriate footnotes. Failure to do so is plagiarism.
11. Financial Formatting. Check your exhibits to make sure you are properly formatting financial information. When preparing columns of financial information, you must first decide whether to present whole numbers, or whether to show the “cents.” (There are rare cases in which we show more than two decimal places for financial information – if you present more than two decimal places, you must have a very compelling argument for why more than two are necessary.) If you choose to show “cents” you must show exactly two decimal places for every number in the column (you should not show some numbers with two decimal places, some with one, and some with none!). Further, financial figures in a column must be aligned on the decimal point, or, in the case of whole numbers, the implied decimal point (e.g., right-justified). Further, in the U.S., we use a comma to separate every three digits of the whole numbers. When adding a column of numbers, (or when subtracting numbers) an underline is used to separate the numbers being added (or subtracted) from the resultant sum (difference).

online discussion-Fixed Assets

1. Is it necessary for a business to use the same method of computing depreciation:
(a) for all classes of its depreciable assets,
(b) for financial statement purposes and in determining income taxes?
2. For some of the fixed assets of a business, the balance in Accumulated Depreciation is exactly equal to the cost of the asset.
(a) Is it permissible to record additional depreciation on the assets if they are still useful to the business and currently used in operation?
(b) When should an entry be made to remove the cost and the accumulated depreciation from the books?

Complete four tax forms Form 1040, Schedule 1, Schedule B, and Qualified Dividends and Capital Gain Tax Worksheet.

The forms provided are for tax year 2020 – (for the W-2, 1099-INT, and 1099-DIV, please disregard the 2018 tax year and treat them as 2020).
Complete the Schedule B first, then Schedule 1, then the Form 1040 down through Line 10. Then complete the Qual Div worksheet and use that information to complete the rest of the Form 1040
Alexander Smith and his wife Allison are married and file a joint tax return for 2020. The Smiths live at 1234 Buena Vista Drive, Orlando, FL 32830. Alexander is a commuter airline pilot but took 6 months off from his job in 2019 to obtain a higher-level pilot’s license. The Smiths have a 17-year-old son, Brad, who is enrolled in eleventh grade at the Walt Disney Prep School. The Smiths also have an 18-year-old daughter, Angelina, who is a part-time first-year student at Orange County Community College (OCCC). Angelina is married to Sean Shirker, who is 19 years old and also a part-time student at OCCC. Sean and Angelina have a 1-year-old child, Trask (Social Security number 115-45-7893). All the Shirkers live in an apartment near the Smiths. Angelina and Sean both also work part-time for Sean’s wealthy grandfather as apprentices in his business. The Shirker’s wages for the year were $50,000 which allowed them to pay all the personal expenses for themselves and Trask.
Name
Social Security number
Date of birth
Alexander Smith
266-15-1966
09/22/1970
Allison Smith
266-34-1967
07/01/1971
Brad Smith
261-55-2121
12/21/2002
Angelina Shirker
261-45-1212
03/31/2001
Sean Shirker
546-78-1235
05/01/2000
Trask Shirker
115-45-7893
10/21/2018
Five years ago, Alexander divorced Jennifer Amistad (Social Security number 341-55-6789). Alexander pays Jennifer $200 per month in alimony under the divorce decree.
Not included with the Smith’s tax forms was interest from State of Florida bonds of $145.00.
Alexander also received a Form W-2, Form 1099-INT, and Form 1099-DIV that you should have downloaded in Step 1 above.

Accounting Help

I have all of the answers to it, but I need help editing and adjusting my sheets to display the correct answers. Those answers will also be attached.
I will provide more information soon. Some files did not attach.

Complete the personal income tax form and arrange the form in order as required in PDF format

1. After completing the tax returns, please save them on your computer in PDF form as per instructions given. Please follow the instructions on the assignment sheet in terms of which items to save.
2. Answer the various questions listed in this assignment.
3. Submit the PDF copy of the return as per the instructions. It is part of the Blackboard assignment.
4. Show cents for all answers please – show as 3200.65

Discussion VII

Many of these occurred prior to the enactment of Sarbanes Oxley (Enron, Worldcom, Waste Management, Adelphia, Tyco, Healthsouth, Qwest Communications, Cendant, and others). Other cases of financial statement fraud have surfaced after SOX was enacted, including Lehman Bros. and Fannie Mae.
For this week’s discussion, choose one of the pre-SOX financial statement fraud cases and write a brief summary (2-3 paragraphs) that outlines:
What happened?
Who was involved?
How did they do it?
How were they caught?
What were the results (for both the victims and the perpetrators)?

At the Movies: Fraud and White-Collar Crime

There are many good examples in which white-collar crime is presented in the film, some of them dramatizations of actual events and others that are purely fictional. In either case, many of these films can be an effective way to consider concepts such as moral ambiguity, immoral and illegal conduct, victimization, enforcement, policy, and jurisprudence