Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 4, Problem 40P
a.
To determine
Identify the effect on tax for each alternative.
b.
To determine
Identify the best alternative, which can be recommended for B Apartments.
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The Bluejay Apartments, a new development, is in the process of structuring its lease agreements. The company would like to set the damage deposits high enough that tenants will keep the apartments in good condition. The company is actually more concerned about damage than about tenants not paying their rent.a. Discuss the tax effects of the following alternatives:• $1,000 damage deposit with no rent prepayment.• $500 damage deposit and $500 rent for the final month of the lease.• $1,000 rent for the final two months of the lease and no damage deposit.b. Which option do you recommend? Why?
The Bluejay Apartments, a new development, is in the process of structuring its lease agreements. The company would like to set the damage deposits high enough that tenants will keep the apartments in good condition. The company is actually more concerned about damage than about tenants not paying their rent.
a. Indicate the tax effects of the following alternatives:
$1,000 damage deposit with no rent prepayment.
$500 damage deposit and $500 rent for the final month of the lease.
$1,000 rent for the final two months of the lease and no damage deposit.
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b. Which alternative do you recommend to maximize deferrals without affecting cash flows?
Sheridan Company leased an office under a six-year contract, which has been accounted for as an operating lease. Faced with the downturn in the economy, the viable company decided to sub-lease the office. However, they have had no luck with this effort and the landlord will not allow the lease to be cancelled. The payments are $29000 per year and there are five years left on the lease. The company's most recent interest rate for financing from a bank is 11%. The risk-free rate on government bonds is 7%. What is the provision for the lease under IFRS?
Chapter 4 Solutions
Individual Income Taxes
Ch. 4 - According to the Supreme Court, would it be good...Ch. 4 - Prob. 2DQCh. 4 - Prob. 3DQCh. 4 - Ben lost his job when his employer moved its...Ch. 4 - Howard buys wrecked cars and stores them on his...Ch. 4 - On December 29, 2019, an employee received a 5,000...Ch. 4 - Prob. 7DQCh. 4 - A Series EE U.S. government savings bond accrues...Ch. 4 - The taxpayer performs services with payment due...Ch. 4 - Wade paid 7,000 for an automobile that needed...
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