The first 2 years of operating expenses are as follows: Year 1 – Gross Sales $750,000, COGS $400,000, Equipment purchase 5 year asset $100,000, Meals and entertainment $10,000, other operating expenses $60,000 Year 2 – Gross Sales $1.5 million, COGS $600,000, operating expenses $300,000 and a fine of $50,000. Federal taxes paid $100,000. Distribution of $100,000 - $25,000 is each shareholder Year 3 – Operations, same as year 2 except for the fines. Also, corporation bought back all of shareholder 1s shares for $170,000 And 600 shares of 2s – Distributed a piece of equipment FMV $100,000, basis $60,000. Please compute the E&P, Taxable income and the tax effect to each shareholder from these transactions.
The first 2 years of operating expenses are as follows: Year 1 – Gross Sales $750,000, COGS $400,000, Equipment purchase 5 year asset $100,000, Meals and entertainment $10,000, other operating expenses $60,000 Year 2 – Gross Sales $1.5 million, COGS $600,000, operating expenses $300,000 and a fine of $50,000. Federal taxes paid $100,000. Distribution of $100,000 - $25,000 is each shareholder Year 3 – Operations, same as year 2 except for the fines. Also, corporation bought back all of shareholder 1s shares for $170,000 And 600 shares of 2s – Distributed a piece of equipment FMV $100,000, basis $60,000. Please compute the E&P, Taxable income and the tax effect to each shareholder from these transactions.
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter3: Taxes On The Financial Statements
Section: Chapter Questions
Problem 22P
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The first 2 years of operating expenses are as follows:
Year 1 – Gross Sales $750,000, COGS $400,000, Equipment purchase 5 year asset $100,000, Meals and entertainment $10,000, other operating expenses $60,000
Year 2 – Gross Sales $1.5 million, COGS $600,000, operating expenses $300,000 and a fine of $50,000. Federal taxes paid $100,000.
Distribution of $100,000 - $25,000 is each shareholder
Year 3 – Operations, same as year 2 except for the fines.
Also, corporation bought back all of shareholder 1s shares for $170,000
And 600 shares of 2s – Distributed a piece of equipment FMV $100,000, basis $60,000.
Please compute the E&P, Taxable income and the tax effect to each shareholder from these transactions.
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