SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN: 9780357391266
Author: Nellen
Publisher: Cengage
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Kate and Mark, a married couple, own a limited liability company. Although Kate and Mark are not yet ready to retire, they would like to begin involving their three children in the business since they are now all responsible adults. Their primary concern is ensuring that the business will remain in their family for future generations. It is also important to Kate and Mark that their children learn the value of a dollar, so they would like them to purchase their interests in the company. Kate and Mark have been successful in their business and have a modest estate, but they do not predict they will owe any estate tax. Which one of the following is the most appropriate form of business transfer technique for Kate and Mark to use to achieve their objectives?
A)A preferred stock recapitalization of the business
B)A gift of the business interests from Kate and Mark to each child
C)A cross-purchase buy-sell agreement between Kate, Mark, and the children
D)An entity…
Jack and Jill decided to pool their money and start a water delivery business. Since they trust each other so much, they did not draw up any legal documents for the business. During the first year of business, they earned $50,000 which was net of $10,000 paid to Jill as a guaranteed payment. During the second year of business, they decided to limit their liability exposure by forming an LLC.
Was a partnership formed during the first year?
If a partnership was formed, how much income will be taxed at the partnership level?
For the second year, do they need to file a partnership tax return?
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