Mary, Mack, and Martha are the investors in the start of the same business. Mary’s net worth is $750,000 and she wants to invest $500,000. Mack’s net worth is $2,000,000 and he wants to invest $1,500,000. Martha’s net worth is $900,000 and she wants to invest $700,000. Which of the following is true
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Mary, Mack, and Martha are the investors in the start of the same business. Mary’s net worth is $750,000 and she wants to invest $500,000. Mack’s net worth is $2,000,000 and he wants to invest $1,500,000. Martha’s net worth is $900,000 and she wants to invest $700,000. Which of the following is true?
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- Nora, Vilma and Sharon are setting up the Past Stars Company and agreed to contribute cash and non-cash assets with total capital at P2,500,000. If there profit and loss ratio will be 5 : 4 : 3 that is based on contributed capital, how much should Sharon invest ?Mickey, Mickayla, and Taylor are starting a new business (MMT). To get the business started, Mickey is contributing $215,000 for a 40 percent ownership interest, Mickayla is contributing a building with a value of $215,000 and a tax basis of $153,750 for a 40 percent ownership interest, and Taylor is contributing legal services for a 20 percent ownership interest. What amount of gain is each owner required to recognize under each of the following alternative situations? [Hint: Look at IRC §351 and §721.] A. MMT is formed as a C corporation. B. MMT is formed as an S corporation. C. MMT is formed as an LLC.Mario and Luigi each own half of a mushroom pizza parlor. They want to expand by purchasing a second brick oven for $30,000. They give Koopa Fund a 10% stake in the pizza parlor in exchange for the necessary capital. From this, we can infer that Luigi must have valued his stake in the business to be worth no more than x. What is x?
- Marlo and Merlins son, Alex, needs 20,000 to start a business. They have 30,000 in securities that they can use to give him the capital he needs. Pertinent information regarding the securities is given below: Marlo and Merlin are in the 28 percent marginal tax rate bracket; Alex is in the 15 percent marginal tax rate bracket. Neither Marlo, Merlin, nor Alex has any other capital asset transactions during the year. Alexs basis in any of the securities gifted to him will be the lesser of his parents basis or the fair market value of the security. Discuss the tax effects of alternate methods of transferring 20,000 to Alex, and devise an optimal plan for making the transfer.Joe, June, and Jim—coworkers—decide that they want to start their own business. Joe has $200,000 to contribute, June has equipment valued at $100,000 (basis = $90,000), and Jim has real estate suitable for the business valued at $200,000 (basis = $110,000). Joe and Jim are each to receive 40 percent of the corporate stock, and June is to receive 20 percent. Joe and June transfer title to their property to the corporation immediately. When Jim tries to transfer title to the real estate to the corporation, several legal errors in the title are discovered, and he is unable to transfer title until the errors are corrected. Correcting the errors takes more than 14 months. In the meantime, the corporation begins operating, renting the building from Jim. In the 15th month, Jim is able to transfer title and receive his stock. Is Jim eligible to use the nonrecognition provisions of Section 351 on this transfer?Sarah and Doug want to set up a company to start a business importing children’s toys from Europe into New Zealand. They will both be directors and equal shareholders. They each pay $500,000 for 100 shares each. The company will have assets (personal property) worth $950,000 and $50,000 in cash reserves. The company will borrow $100,000 from Big Bank to make the first purchase of toys from Europe. The company’s assets do not have any securities registered over them. Which of the following statements are INCORRECT? As the directors of the company, Sarah and Doug are personally liable for the $100,000 debt that the company will incur. The company will carry on existing if either Sarah or Doug retires as a director or sells their shares. The company is a separate legal person and its debts are separate from those owed by Sarah and Doug. Sarah and Doug will be able to issue additional shares and sell them if they want to raise additional funds for their company in the future.
- Alice, Betty and Carol are equal owners of ABC, Inc. They believe that ABC is worth about $3,000,000 today. They think that the value of ABC will increase by about 5% to 10% per year. Each of them has a basis in their stock of $500,000. ABC is very profitable. Each of them draw an annual salary of $250,000. They agree that if any one of them dies, they do not want anyone else to be the owner of the decedent’s stock. Explain which method you recommend they use and why. ( a stock redemption buy-sell agreement or a cross-purchase buy-sell agreement )Olivia sets up her home design company as a corporation. She expects to generate cash flows of $500,000 per year. She will fund the corporation with $4,500,000 and the corporation will be funded entirely with equity. Assume Olivia faces a tax rate of 30%. Using a discount rate of 8%, what is the NPV of the company? Responses -$125,000 -$125,000 $0 $0 $1,750,000 $1,750,000 -$1,750,000Ella and Aaron Martin together earn approximately $92,000 a year after taxes. Through an inheritance and some wise investing, they also have an investment portfolio with a value of almost $200,000. a. How much of their annual income do you recommend the Martins hold in some form of liquid savings as reserves? Explain. b. How much of their investment portfolio do you recommend they hold in savins and other short-term investment vehicles? Explain. c. How much, in total, should they hold in short-term liquid assets?
- Ella and Aaron Martin together earn approximately $92,000 a year after taxes. Through an inheritance and some wise investing, they also have an investment portfolio with a value of almost $200,000. a. how much of annual income do you reccoment they hold in liquid savings as reserves? why? b. How much of their investment portfolio do you reccoment they hold in savings and other short term vehicles? Explain. c. How much, in total, should they hold in short term liquid assets? Determine the right amount of short term, liquid assets. (Explain.) (Explain.) How much in total in liquid assets:Rondo and his business associate, Larry, are considering forming a business entity called R&L, but they are unsure about whether to form it as a C corporation, an S corporation, or an LLC taxed as a partnership for tax purposes. Rondo and Larry would each invest $200,000 in the business. Thus, each owner would take an initial basis in his ownership interest of $200,000 no matter which entity type is formed. Shortly after the formation of the entity, the business borrowed $60,000 from the bank. If applicable, this debt will be shared equally between the two owners. A. After taking the loan into account, what is Rondo's tax basis in his R&L stock if R&L is formed as a C corporation? B. After taking the loan into account, what is Rondo's tax basis in his R&L stock if R&L is formed as an S corporation? C. After taking the loan into account, what is Rondo's tax basis in his R&L stock if R&L is formed as an LLC and taxed as a partnership?