Trueblood Case 13-11 Lol Essay example

The new Wahoo Inc. emerged from bankruptcy on August 30, 2015, and it plans to make an acquisition within 6 months. Due to the planned acquisition, Wahoo’s revenue and profit are anticipated to increase 15% and 12% respectively. Therefore the company would prefer to preserve the NOL carryovers to offset the future taxable income. However, since Wahoo’s reorganization was essentially Type G reorganization – bankruptcy fillings, Section 382 limitation can come into play regarding the NOL it can deduct in subsequent years. The research question hinges upon the treatment of

Section 351(c)(2) allows shareholders to dispose of all or part of the transfers stock without preventing the corporations Section 351 transaction from satisfying the “ control immediate after” requirement (4). Section 351(d) states that there are times when services, certain indebtedness, and accrued interest not treated as property as per James v. Commissioner, 53 T.C. 63 (1969); cf. Hospital Corporation of America v. Commissioner, 81 T.C. 520

While not defined by ASC 740, practice has generally been to consider the most recent three years when assessing cumulative losses. Positive evidence of sufficient quantity and quality would be needed to overcome this significant negative evidence and conclude that a valuation allowance is not warranted. As with all elements of available evidence, a cumulative loss is simply one data point — it is not a "bright line" test that is in and of itself determinative of the need for a valuation allowance. To illustrate, assume that a company is in a three-year cumulative income position of $10 million, but the results of the past three years have flipped from income to losses (2006: income of $100 million; 2007: loss of $30 million; 2008: loss of $60 million). Does the fact that the company is still in a three-year cumulative income position at the end of 2008 automatically suggest that a valuation allowance is not warranted? On the other hand, assume a company had previously recorded a full valuation allowance and incurred a loss of $100 million in 2008, but earned $30 million in 2009 and $60 million in 2010. Does the fact that the company is still in a

As we learned last week in Chapter 14, a taxpayer does not recognize a gain or loss on the transfer of property to a corporation as long as the transferors have control* of the corporation immediately following the exchange (IRC 351). The taxpayer can transfer virtually any type of property, including cash, inventory, intellectual property (such as a patent), or a building. It’s important, upon corporate formation, that accurate records are kept on what property was used to form the corporation and what its value is. This information is used to establish the shareholder’s basis in the stock as well as the corporation’s basis in the assets contributed, which has particular importance in a corporate liquidation. In theory, the value of the assets contributed will be equal to the value of the corporate stock received;

Prepare the journal entries for the years 2008 to 2012 to record income tax expense and the effects of the net operating loss carrybacks and carryforwards assuming Synergetics Company uses the carryback provision. All income and losses relate to normal operations.( In recording the benefits of a loss carryforward, assume that no valuation account is deemed necessary.)

A reduction in a deferred tax asset or an increase in a deferred tax liability

Adjustment: the increase in value should be credited to other comprehensive income less the loss that was recognized in the prior year. EUR 5K should be recorded as a gain on the income statement because it reverses the previously recognized loss. The remaining EUR 15K should be recorded in OCI and accumulated in equity under revaluation surplus.

As a matter of fact, within the limitation of a short paper, this study aims to provide a critical review on the Accounting issues in Business combination under the requirement of Australian standards – or to be specific, under the conceptual framework provided by the Australian Accounting Standard Board (AASB.) Firstly, evaluation on the exclusions from the scope of AASB 3 is brought about, followed by the implications of the requirement to use the acquisition method of accounting for business combinations, the determination of fair value of assets, the reasons why fair value method is chosen in a business combination and lastly, a review on the nature and treatment of goodwill or bargain purchase from these particular transactions will be mentioned.

Built in Gains and Losses. If the aggregate fair market value of the loss corporation’s assets either exceeds or is less than its aggregate tax basis in those assets by an amount which is more than the lesser of 10% of the aggregate value of the assets on that date or $10 million, then special rules apply. If in the year of the transaction or a later year the corporation recognized gain on property which it owned on the transaction date, the annual limitation would be increased for that year by the amount necessary to shelter the portion of its net unrealized built in gain attributable to such property. The net unrealized built in gain is the excess of the aggregate value of all of the corporation’s property on the transaction date over its aggregate tax basis in all of its property at that time.

FASB issued this statement to replace the complex SFAS No. 96 which was concerned with the recognition of deferred income taxes. SFAS No. 109 requires that deferred tax liabilities for all taxable temporary differences and deferred tax assets for all deductible temporary differences and tax credit and operating loss carry forwards be recognized. The Balance Sheet approach is used. Deferred income tax assets and liabilities represent assets and liabilities instead of residual deferred charges and credits. Under the liability method, an enterprise recognizes a deferred tax asset or a deferred tax liability for the future income tax effects of the difference between the tax basis of the asset or liability and its reported amount in the financial statements.

If within a period of twelve months, a corporation acquires from an unrelated seller in a taxable transaction, stock representing at least 80% of the vote and value of another corporation section 338 allows the purchasing corporation (and, in more limited circumstances, jointly with the selling shareholders) to irrevocably elect (“section 338 election”) that such stock acquisition be regarded as a purchase of the underlying assets for federal income tax purposes. The election is made by filing Form 8023 with the Service within 8½ months from the end of the month in which the acquisition was made.

First of all, under US GAAP on ASC 805, the value of goodwill can be recognized initially by measuring any excess of the fair value of the acquired business over the fair value of the net identifiable assets acquired. According to the ASC 805-30-30-1 from the FASB website, it mentions that “The acquirer shall recognize goodwill as of the acquisition date, measured as the excess of (a) over (b): (a) The aggregate of the following: (1) The consideration transferred measured in accordance with this Section, which generally requires acquisition-date fair value

Referring to AASB 112 paragraph 34, “a deferred tax asset should be recognised for the carryforward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and used tax credits can be utilised.” If an entity has unused tax losses from the previous year, then it would be carried-forward. Recognising deferred tax asset (DTA) might be the most complex and subjective area of Financial Accounting Standards Board Statement paragraph 109, Accounting for Income Taxes (Petree, 1995). In this case, several companies do not want to recognize the deferred tax asset in the balance sheet. Assume that a company has suffered tax losses for two or more consecutive years, it means that the company performs badly and the probability of having profit in the future period is very low. In order to use the tax losses, a company should earn profit in the next financial year. “Unless there are strong reasonable grounds to believe that ‘it is probable that future taxable profit will be available’, such as: entering an agreement with customers for next 12 month orders, the company should not recognise the DTA, based on ground of prudence” (Kauditor, 2007). Moreover, one could disclosed unused tax losses or in the form of notes to financial statement, as an information to financial statements users. An entity shall recognise a deferred tax asset and operating loss and tax

Depending upon how the acquisition is accounted for, this difference will be recorded as goodwill on the acquiring firm’s books or not be recorded at all.

A company which produce a part or a component will be allowed an allowance in respect of depreciation of buildings, machinery, plant or furniture owned and used the assesee for the purpose of business and profession.