Desmond was appointed director and managing director of Candore Limited. The terms of his service contract provided that he should hold office for eight years and this term was also stated in Candor's Articles of Association. The other directors decided that Desmond should be removed from those positions and they placed such a resolution before shareholders at a general meeting and it was duly passed. Desmond is certain that his removal would be in breach of the Articles of Association as well as his contract and intends to seek legal advice. A. Draft a statement for the board of directors explaining whether shareholders had authority to pass the resolution. Also, suggest what legal redress Desmond might have. B. Submit TWO (2) duties and TWO (2) rights of a partner.
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- Malky is manager of York Steel Ltd. His contract is for 10 years. In the third year Malky enters into a restrictive covenant which provides that during the remainder of his contract he must not reveal or use confidential information other than to his employer. It further provides that he must not work for a competitor during the remainder of the employment agreement. Consideration for entering into the agreement is $40,000. Is this capital or income in Malky’s hands?Suppose you are a CPA hired to represent a client who is currently under examination by the IRS. The client is the president and 95% shareholder of a building supply sales and warehousing business. He also owns 50% of the stock of a construction company. The client's son owns the remaining 50% of the construction company's stock. The client has received a notice of proposed adjustments (NPA) on three significant issues related to the building supply business for the years under examination. The issues identified in the NPA are unreasonable compensation, stock redemptions, and a rental loss. Additional facts regarding the issues are reflected below: Stock redemptions: During the audit period, the construction company redeemed 50% of the outstanding stock owned by the client and 50% of the stock owned by the client's son, leaving each with the same ownership percentage of 50%. The IRS treated the redemption as a distribution under IRC Section 301. Create a tax plan. Use Section 301 of…Suppose you are a CPA hired to represent a client who is currently under examination by the IRS. The client is the president and 95% shareholder of a building supply sales and warehousing business. He also owns 50% of the stock of a construction company. The client's son owns the remaining 50% of the construction company's stock. The client has received a notice of proposed adjustments (NPA) on three significant issues related to the building supply business for the years under examination. The issues identified in the NPA are unreasonable compensation, stock redemptions, and a rental loss. Additional facts regarding the issues are reflected below: Stock redemptions: During the audit period, the construction company redeemed 50% of the outstanding stock owned by the client and 50% of the stock owned by the client's son, leaving each with the same ownership percentage of 50%. The IRS treated the redemption as a distribution under IRC Section 301. Develop a research-based and ethical…
- Suppose you are a CPA hired to represent a client who is currently under examination by the IRS. The client is the president and 95% shareholder of a building supply sales and warehousing business. He also owns 50% of the stock of a construction company. The client's son owns the remaining 50% of the construction company's stock. The client has received a notice of proposed adjustments (NPA) on three significant issues related to the building supply business for the years under examination. The issues identified in the NPA are unreasonable compensation, stock redemptions, and a rental loss. Additional facts regarding the issues are reflected below: Stock redemptions: During the audit period, the construction company redeemed 50% of the outstanding stock owned by the client and 50% of the stock owned by the client's son, leaving each with the same ownership percentage of 50%. The IRS treated the redemption as a distribution under IRC Section 301. Establish when stock redemption is…Suppose you are a CPA hired to represent a client who is currently under examination by the IRS. The client is the president and 95% shareholder of a building supply sales and warehousing business. He also owns 50% of the stock of a construction company. The client's son owns the remaining 50% of the construction company's stock. The client has received a notice of proposed adjustments (NPA) on three significant issues related to the building supply business for the years under examination. The issues identified in the NPA are unreasonable compensation, stock redemptions, and a rental loss. Additional facts regarding the issues are reflected below: Stock redemptions: During the audit period, the construction company redeemed 50% of the outstanding stock owned by the client and 50% of the stock owned by the client's son, leaving each with the same ownership percentage of 50%. The IRS treated the redemption as a distribution under IRC Section 301. Determine reasonable versus…William Schmalz entered into an employment contract with Hardy Salt Company. The contract granted Schmalz six months’ severance pay for involuntary termination but none for voluntary separation or termination for cause. Schmalz was asked to resign from his employment. He was informed that if he did not resign, he would be fired for alleged misconduct. When Schmalz turned in his letter of resignation, he signed a release prohibiting him from suing his former employer as a consequence of his employment. Schmalz consulted an attorney before signing the release and upon signing it received $4,583.00 (one month’s salary) in consideration. Schmalz now sues his former employer for the severance pay, claiming that he signed the release under duress. Is Schmalz correct in his assertion?
- Adams, by fraudulent representations, induced Barton to purchase one hundred shares of the capital stock of the Evermore Oil Company. The shares were worthless. Barton executed and delivered to Adams a negotiable promissory note for $5,000, dated May 5, in full payment for the shares, due six months after date. On May 20, Adams indorsed and sold the note to Cooper for $4,800. On October 21, Barton, having learned that Cooper now held the note, notified Cooper of the fraud and stated he would not pay the note. On December 1, Cooper negotiated the note to Davis who, while not a party, had full knowledge of the fraud perpetrated on Barton. Upon refusal of Barton to pay the note, Davis sues Barton for $5,000. Is Davis a holder in due course or, if not, does he have the rights of a holder in due course? Explain.On February 2, Phillips induced Miller to purchase from her fifty shares of stock in the XYZ Corporation for $10,000, representing that the actual book value of each share was $200. A certificate for fifty shares was delivered to Miller. On February 16, Miller discovered that the book value on February 2 was only $50 per share. Will Miller be successful in a lawsuit against Phillips? Why or why not?Kenny Merinoff and his daughter, Mia, own all outstanding stock of flamingo Corporation. Both Mia and Kenny are officers in the corporation and together with Kenny’s Uncle, Ira, comprise the entire board of directors. Flamingo uses the cash method of accounting and has a calendar year-end. In late 2013, the board of directors adopted the following legally enforceable resolution (agreed to in writing by each of the officers): Salary payments made to an officer of the corporation that shall be disallowed in whole or in part as a deductible expense for Federal Income tax purposes shall be reimbursed by such officer to the corporation to the full extent of the disallowance. It shall be the duty of the board of directors to enforce payment of each such amount. In 2019, Flamingo paid Kenny $800,000 in compensation. Mia received $650,000. On an audit in late 2020, the IRS found compensation of both officers to be excessive. It disallowed deductions for $400,000 of the payment to Kenny and…
- Wilson Corporation granted an incentive stock option to Reva on January 1, two years ago. The option price was $300, and the FMV of the Wilson stock was also $300 on the grant date. The option allowed Reva to purchase 150 shares of Wilson stock. Reva exercised the option on August 1, this year, when the stock's FMV was $400. Unless otherwise stated, assume Reva is a qualifying employee. The results of the above transactions to Reva will be a. no income to Reva on the grant date or exercise date but there is an alternative minimum tax adjustment item to Reva of $15,000. b. no income tax or alternative minimum tax effect for Reva. c. ordinary income to Reva on the exercise date of $15,000. d. capital gain to Reva on the exercise date of $15,000.Due to COVID-19, Angel Corp. incurred huge losses. In order to continue its business operation, the company decided to reduce its employees by creating a redundancy program in accordance with the labor laws. It offered each employees triple the amount of their separation pay. Michael, one of the employees of Angel Corp accepted the offer of the company. After several months, the company is still experiencing huge losses, thus it filed a bankruptcy. John, one of the employees of Angel Corporation, was terminated by the company as a result of its bankruptcy. He received his separation pay in accordance with the labor laws. The separation pay received by John is considered as: Group of answer choices b. Exclusions from Gross Income e. None of the Above a. Inclusions in / Items of Gross Income c. Capital gains subject to capital gains tax d. Passive income subject to final taxMary Ribukh was hired as a staff auditor of LGY and Company in 2005. In December 2012, he transferred to Quilava and Associates. In 2014, he returned back to LGY and Company until his retirement in 2020 at the age of 55. Question 1: Are the retirement benefits taxable to Anton? Question 2: Suppose he was terminated from employment due to dishonesty. Is the separation pay taxable to Anton? Question 3: Suppose he was terminated from employment due to the merger of the two audit firms Will the separation pay be taxable to Anton? Yes, Yes, Yes No, Yes No No Yes, Yes Yes, No, No