Mr. and Mrs. Velotta are self-employed professional musicians. Their average annual income from performance fees and music lessons is $130,000. The couple wants to shift income to their two children, ages 19 and 22. Can Mr. and Mrs. Velotta organize their music business as a family partnership and give each child a 25 percent interest?

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Answer 1

Textbook Question

Chapter 12, Problem 1QPD

Mr. and Mrs. Velotta are self-employed professional musicians. Their average annual income from performance fees and music lessons is $130,000. The couple wants to shift income to their two children, ages 19 and 22. Can Mr. and Mrs. Velotta organize their music business as a family partnership and give each child a 25 percent interest?

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

Expert Solution & Answer

To determine

Explain whether Person V and his wife can organize their music business as a family partnership and give each child a 25 percent interest.

Explanation of Solution

In the professional service business of Person V and his wife, capital is not a material income-producing factor. Hence, for shifting earned income to their children, a family partnership cannot be formed by them.

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Richard is a retired solicitor. His wife Tracy is a retired school teacher. Both wish to remain active and they invest in a gift shop that is to be managed by their daughter Alice, who is aged 35. They form a partnership of three called “Alice's Gift Shop”. Richard and Tracy contributed $40,000 each to fund the purchase of the shop. The partnership agreement provides: •Both Richard and Tracy are to receive interest at the rate of 10% p.a. on their capital contribution of $40,000. •Alice will receive a salary of $25,000 for the management of the shop, as well as superannuation contributions of$6,000. •A car will be leased by the business and provided to Alice. •All profits and losses are tobe shared equally between the threepartners. The accounts for this income year show the following: Income ($) Sales (excluding GST) 240,000 Expenses($) Cost of good sold 130,000 Interest on capital paid to Richard and Tracy 8,000 salary to Alice 25,000 superannuation to Alice 6,000…

Answer 2

Textbook Question

Chapter 12, Problem 1QPD

Mr. and Mrs. Velotta are self-employed professional musicians. Their average annual income from performance fees and music lessons is $130,000. The couple wants to shift income to their two children, ages 19 and 22. Can Mr. and Mrs. Velotta organize their music business as a family partnership and give each child a 25 percent interest?

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

Expert Solution & Answer

To determine

Explain whether Person V and his wife can organize their music business as a family partnership and give each child a 25 percent interest.

Explanation of Solution

In the professional service business of Person V and his wife, capital is not a material income-producing factor. Hence, for shifting earned income to their children, a family partnership cannot be formed by them.

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Answer 3

Textbook Question

Chapter 12, Problem 1QPD

Mr. and Mrs. Velotta are self-employed professional musicians. Their average annual income from performance fees and music lessons is $130,000. The couple wants to shift income to their two children, ages 19 and 22. Can Mr. and Mrs. Velotta organize their music business as a family partnership and give each child a 25 percent interest?

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

Expert Solution & Answer

To determine

Explain whether Person V and his wife can organize their music business as a family partnership and give each child a 25 percent interest.

Explanation of Solution

In the professional service business of Person V and his wife, capital is not a material income-producing factor. Hence, for shifting earned income to their children, a family partnership cannot be formed by them.

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Answer 4

Textbook Question

Chapter 12, Problem 1QPD

Mr. and Mrs. Velotta are self-employed professional musicians. Their average annual income from performance fees and music lessons is $130,000. The couple wants to shift income to their two children, ages 19 and 22. Can Mr. and Mrs. Velotta organize their music business as a family partnership and give each child a 25 percent interest?

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

Expert Solution & Answer

To determine

Explain whether Person V and his wife can organize their music business as a family partnership and give each child a 25 percent interest.

Explanation of Solution

In the professional service business of Person V and his wife, capital is not a material income-producing factor. Hence, for shifting earned income to their children, a family partnership cannot be formed by them.

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Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

To determine

Explain whether Person V and his wife can organize their music business as a family partnership and give each child a 25 percent interest.

Explanation of Solution

In the professional service business of Person V and his wife, capital is not a material income-producing factor. Hence, for shifting earned income to their children, a family partnership cannot be formed by them.

Answer 8

Expert Solution & Answer

To determine

Explain whether Person V and his wife can organize their music business as a family partnership and give each child a 25 percent interest.

Explanation of Solution

In the professional service business of Person V and his wife, capital is not a material income-producing factor. Hence, for shifting earned income to their children, a family partnership cannot be formed by them.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

Explain whether Person V and his wife can organize their music business as a family partnership and give each child a 25 percent interest.

Answer 12

Explanation of Solution

In the professional service business of Person V and his wife, capital is not a material income-producing factor. Hence, for shifting earned income to their children, a family partnership cannot be formed by them.

Answer 13

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