Essay on Corporation

According to the FASB, guidance on contingent liabilities applies to all entities, therefore corporations and partnerships should approach damage estimates similarly. FASB specifies that contingencies be measured at

The appellants view the “substance” of the transaction is over the “form”. Generally, taxpayers are bound by the form of their transaction and may not argue the substance triggers different tax consequences. The Tax Court found the form and substance of the transaction was a loan from the bank to VAFLA and not to the appellants. The proceeds were to be used in the operation of the business and petitioners were not free to dispose the loan. Nor were the payments reported as constructive dividends.

1.What are conversion factors? Why were conversion factors developed? How do they impact on which bond is cheapest to deliver? Under what conditions would there be no cheapest to deliver? Explain in detail.

b. Ken sold 1,000 shares of stock for $32 a share. He inherited the stock two years ago. His tax basis (or investment) in the

There is also the concept of secondary liability. This means that if, for example, an employment agency

T, an individual taxpayer, plans to incorporate his farming and ranching activities, currently operated as a sole proprietorship. His primary purpose of incorporating is to transfer a portion of his ownership in land to his son and daughter. T believes that gifts of stock rather than land will keep his business intact. Included in the property he plans to transfer is machinery purchased two years earlier.

In 2013 Marianne sold land, building and equipment with a combined basis of $150,000 to an unrelated third party and in return received an installment note of $80,000 per year for five years. Of the $250,000 gain on sale, $150,000 was classified as Section 1245 gain and the remaining $100,000 was Section 1231 gain. In 2013, Marianne had a capital loss carryover of $60,000, $50,000 of which she used to offset her Section 1231 gain; she recognized no Section 1245 gain. The following year she recognized $40,000 of 1245 gain and $10,000 of Section 1231 gain which she promptly offset with the last $10,000 of the capital loss carryover. In 2015, she recognized $50,000 Section 1245 gain and no Section 1231 gain.

Luthra, V. (2011). Direct Liability. Business dictionary. Fairfax, VA : WebFinance, Inc. Retrieved from http://www.businessdictionary.com/definition/direct-liability.html

* The liability does not fall on one individual instead it is assumed by the business in a corporation. Individuals representing the company can still be personally sued in some states.

Two main risks need to be considered with this acquisition. The first risk is the contingent liabilities arising from Elson’s compensation and accumulated earnings from PTI’s interest-earning assets. Lane should provide the bank information on the accountant’s opinion on these contingent liabilities as rationale the bank’s valuation needs to discount them from their asking price.

* Unlimited Liability - The liability of the sole proprietor is unlimited. This implies that, in case of loss the

If an item meets one of those requirements, the company can deduct the cost of the item during the year in which the item is first used or consumed. If not, the company generally needs to “capitalize the amounts paid to acquire or produce tangible property” under Reg. §1.263(a)-1. However, there is also an exception called de minimis safe harbor election under the Reg. §1.263(a)-1(f). In order to utilize this election, a company must have written accounting procedures in place before January 1, 2014, The written accounting procedures must clarify that for non-tax purposes the company expenses items with the amount paid to a property costing less than a specific amount of money or a property with economic useful life of 12 months or less. The election provides business with the option to expense/deduct annually up to $5,000 per item/invoice if the company has an applicable financial statement (AFS), or up to $500 per item/invoice if the company does not have an AFS. An AFS is defined in

The statement of reserves should be reviewed, since the acquisition of the tavern, through the purchase of the seller’s interest, results in the buyer, Ms. Growne accepting both known and unknown liabilities of the business prior to her ownership. In addition, by reviewing the financial statements to look at the net operating gain or loss, Ms. Growne can determine if there is a loss she can offset against her other sources of income. For some individuals, the idea of being able to offset other income with these losses incurred prior to ownership is appealing, due to the tax benefit that may result. However, if the buyer does not have significate income to be offset or is not in a higher tax brackets, this benefit of the acquisition through interest becomes less attractive. In addition, if the sellers basis in the assets are significantly less than the assets fair market value, the buyer is likely to incur greater gains on the assets in the future, resulting in a higher taxable income and leading to negative tax implication. In contrast, if the assets of the business were purchased, the buyer would not be susceptible to prior liabilities and the seller must examine their basis for each asset, compare it with the assets current market value, and incur any applicable gains or losses, intern shifting the tax consequences of an increase in

Based on this information, only an immaterial amount of companies actually accrue a liability in their financial statement. Therefore, M Corporation will simply provide disclosure of the contingency and an estimate of the possible loss or range of loss for the future pending litigation in its 2007 financial statement under Note: Contingencies and Commitments. If M Corporation accrued a liability on its 2007 financial statements, then the company becomes too transparent to opposing counsel and it could have serious adverse effects on M’s operations.

Brenda Franklin had been serving Allied Tech for the past 8 years. As any other organisations, Brenda used to be a part of the lunch hour conversations with her colleagues. One day when her colleagues were discussing about corruption and politics, something occurred to her. As a result she prepared a list called “Ethically Dubious Conduct” and pasted it on the common notice board. Her colleagues were taken by surprise. Brenda was now anticipating the next lunch where she was expecting her list to be analysed among her colleagues.