Question 1: Darlene Saunders has carried on a business as a sole proprietor for over 10 years. The business has been very successful and has now reached a point where it is producing more income than she requires for her personal needs. Given this, she would like to incorporate the business to a new corporation, using the provisions of ITA 85(1). On January 5, 2023, the sale date, the tangible property of the business have total tax costs of $375,000. The combined FMV is $1,190,000 without goodwill. In addition, because of the success of the business, it is estimated that the business has goodwill the FMV of which is $320,000. At the transaction date, business liabilities are $115,000. The elected amount for the transfer will equal the tax costs of $375,000. The corporation will assume the $115,000 in business liabilities. In addition, Darlene will receive: • A promissory note of $85,000. • Preferred shares with a FMV of $100,000. • Common shares with a FMV of $1,210,000. Any taxable dividends paid by the corporation will be non-eligible. Required: Determine the following: 1. The ACB of each type of consideration received by Darlene. 2. The PUC of each class of shares issued as consideration by the new corporation. 3. The income tax consequences to Darlene if the new preferred shares are redeemed at their FMV. (15 marks)

Heron Company purchases commercial realty on November 13, 2002, for $650,000. Straight-line depreciation of $287,492 is claimed before the property is sold on February 22, 2020, for $850,000. What are the tax consequences of the sale of realty if Heron is: A C corporation?

On May 31, 2022, Javier Sanchez purchased and placed in service a new 7-year class asset costing $470,000 for use in his landscaping business, which he operates as a single member LLC (Sanchez Landscaping LLC). Rather than using bonus depreciation, Javier would like to use § 179 to expense $200,000 of this asset and then use regular MACRS to cost recover the remaining cost. During 2022, his business generated a net income of $564,000 before any § 179 immediate expense election. If required round your intermediate computations and final answers to the nearest dollar. Click here to access the depreciation table to use for this problem. a. Determine the cost recovery deductions (including first-year additional depreciation) that Javier Sanchez can claim with respect to this asset in 2022 and 2023. Total cost recovery deduction in 2022: Total cost recovery deduction in 2023: $

Required Information [The following information applies to the questions displayed below.] Julio and Milania are owners of Falcons Corporation, an S corporation. Each owns 50 percent of Falcons Corporation. In year 1, Julio and Milania each received distributions of $12,000 from Falcons Corporation. Sales revenue Cost of goods sold Falcons Corporation (an S Corporation) Income Statement December 31, Year 1 and Year 2 Salary to owners Julio and Milania Employee wages Depreciation expense Section 179 expense Interest income (related to business income) Municipal bond income Government fines Overall net income Distributions Ordinary Income Amount Year 1 $ 335,000 (42,000) (40,000) (30,000) (20,000) (30,000) 12,000 1,808 Allocated to Julio 0 $ 186,800 $ 24,000 a. What amount of ordinary income and separately stated items are allocated to them for year 1 based on the information above? Assume that Falcons Corporation has $240,000 of qualified property (unadjusted basis). Year 2 $ 465,000…

Required Information [The following information applies to the questions displayed below.] Aruna, a sole proprietor, wants to sell two assets that she no longer needs for her business. Both assets qualify as §1231 assets. The first is machinery and will generate a $31,250 §1231 loss on the sale. The second is land that will generate a $15,200 §1231 gain on the sale. Aruna's ordinary marginal tax rate is 32 percent. Note: Input all amounts as positive values. a. Assuming she sells both assets in December of year 1 (the current year), what effect will the sales have on Aruna's tax liability? Aruna's tax will decrease by

1. George operates a business that generated revenues of $50 million and allocable taxable income of $560,000. Included in the computation of allocable taxable income were $900,000 of business interest expense, $20,000 of business interest income, and $180,000 of depreciation. What is the maximum business interest deduction that George will be eligible to claim this year if the business does not qualify under the gross income test? a) $168,000 b) $560,000 c) $612,000 d) $452,000   2. Mike started a calendar-year business on September 1stSeptember 1st of this year by paying 12 months of rent on his shop at $550 per month. What is the maximum amount of rent that Mike can deduct this year under each type of accounting method? a) $6,600 under the cash method and $6,600 under the accrual method   b) $6,600 under the cash method and $2,200 under the accrual method c) $2,200 under the cash method and $2,200 under the accrual method d) $2,200 under the cash method and zero under the…

Dinesh Bhai

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On January 20, 2022, Javier Sanchez purchased and placed in service a new 7-year class asset costing $419,600 for use in his landscaping business, which he operates as a single member LLC (Sanchez Landscaping LLC). Rather than using bonus depreciation, Javier would like to use § 179 to expense $200,000 of this asset and then use regular MACRS to cost recover the remaining cost. During 2022, his business generated a net income of $503,520 before any § 179 immediate expense election. If required round your intermediate computations and final answers to the nearest dollar. Click here to access the depreciation table to use for this problem. a. Determine the cost recovery deductions (including first-year additional depreciation) that Javier Sanchez can claim with respect to this asset in 2022 and 2023. Total cost recovery deduction in 2022: $ 31,381 Total cost recovery deduction in 2023: $ 53,780 b. Complete Javier's Form 4562 (page 1) for 2022. Note: For 2022, the maximum § 179 is…