Refer to the IRS's ATG on Auto Dealership.Suppose a dealer sells a car to a customer forthe following:Sales Price (including Sales Tax and licensefees) $10,000Less: Down Payment 1,000Balance to Be Financed $ 9,000Finance Charge at 10% 900Face amount of Installment Note $ 9,900The dealer sells the note to a financecompany who agrees to pay the dealer a 20%commission on the finance charge, or $180.(a) What is the correct entry to make?(b) Referring to J.R. Hansen, SCt, 59-2 USTC19533, 360 US446, 79 SCt 1270, when is theamount held back taxable to the dealership?

Note: Note can be defined as the instrument issued by a lender to the borrower that reflects the…

Answered: (a) What is the correct entry to make?…

(a) What is the correct entry to make? (b) Referring to J.R. Hansen, SCt, 59-2 USTC 19533, 360 US446, 79 SCt 1270, when is the amount held back taxable to the dealership?

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter2: Income Tax Concepts

Section: Chapter Questions

Problem 18P

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Question

Refer to the IRS's ATG on Auto Dealership.
Suppose a dealer sells a car to a customer for
the following:
Sales Price (including Sales Tax and license
fees) $10,000
Less: Down Payment 1,000
Balance to Be Financed $ 9,000
Finance Charge at 10% 900
Face amount of Installment Note $ 9,900
The dealer sells the note to a finance
company who agrees to pay the dealer a 20%
commission on the finance charge, or $180.
(a) What is the correct entry to make?
(b) Referring to J.R. Hansen, SCt, 59-2 USTC
19533, 360 US446, 79 SCt 1270, when is the
amount held back taxable to the dealership?

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