REW, Inc. is closely held by six members of the REW family. The corporation owns two vans that employees use for various business transportation purposes. However, for at least eight weeks during each year, the shareholders use the vans to take their families on extended vacation trips. Identify the tax issue or issues suggested by the following situations, and state each issue in the form of a question.
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REW, Inc. is closely held by six members of the REW family. The corporation owns two vans that employees use for various business transportation purposes. However, for at least eight weeks during each year, the shareholders use the vans to take their families on extended vacation trips.
Identify the tax issue or issues suggested by the following situations, and state each issue in the form of a question.
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- State whether each of the following payments is a tax. Explain your answers. To incorporate his business, Alex pays the state of Texas a $2,000 incorpora tion fee. The city paves a road and assesses each property owner on the road $4,000 for his or her share of the cost. The city of Asheville charges each residence in the city $10 per month to pick up the trash. Rory pays $450 of income tax to the state of California. Lanny is fined $45 for exceeding the speed limit.Shafron, Inc. is a calendar year-end, cash method taxpayer. It provides consulting services for various clients in the local community. Shafron, Inc. had the following transactions in 2020. Determine the tax treatment for each transaction. For credit, you must round your answer to the NEAREST DOLLAR. Do NOT enter the dollar sign in your answer - only enter the numbers (e.g., X,XXX). For example, one thousand dollars should be entered as 1,000. Enter zero (i.e., “0”) where necessary. (a) On March 15, 2020, Shafron, Inc. received $30,000 from JBD, Inc. for business consulting services. Shafron, Inc. estimated the project will take 6 months and began working on the project on April 1, 2020. How much (if any) of the payment is included in Shafron, Inc.’s gross income? $ (b) Shafron, Inc. purchases an 18-month liability insurance policy. Per the contract with the insurance company, Shafron, Inc. paid the entire cost of the insurance coverage ($36,000) on November 1, 2020. The coverage…E Corporation is a subchapter S corporation owned by three individuals with calendar year-ends. The corporation sells a sports drink as its principal product and has similar sales each month. What options does E Corporation have in choosing a tax year? E Corporation may choose any month end as its tax year. Because the owners of E Corporation have tax years ending in December, E Corporation must also choose a December year-end. E Corporation may choose an October, November, or December tax year-end. E Corporation may choose a tax year ending in September, October, or November, but only if the corporation also makes an annual cash deposit and adjusts the amount every year depending on the income deferred.
- Printer Company pays a 25,000 annual membership fee to a trade association for paper wholesalers. The trade association estimates that 60% of its dues are allocated to lobbying activities. a. What are Printers total deductible expenses for tax purposes? b. Assume the same facts as above, except that the 25,000 was incurred for in-house lobbying expenses. What are Printers total deductible expenses for tax purposes?In each of the following problems, identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that you identify. Ariel has worked for Sander Corporation for 30 years. Sander has a pension plan in which it matches employee contributions by up to 5 percent of the employees salary. Ariel, who is single, retires during the current year when she is 66 years old. Her pension plan contains payments and earnings of 300,000, half of which are attributable to payments made by Ariel and half attributable to payments made by Sander. Under the plan, Ariel is to receive 2,000 per month until she dies.On November 1 of this year, Jaxon borrowed $42,000 from Bucksnort Savings and Loan for use in his business. In December, Jaxon paid interest of $3,780 relating to the 12-month period from November of this year through October of next year. How much interest, if any, can Jaxon deduct this year if his business uses the cash method of accounting for tax purposes?
- Raquel is an employee of Jones Company and owns a 30 percent interest in the company. Her salary is $44,000. She also receives a $10,000 cash distribution from Jones. During the current year, Jones's operating income is $130,000.Identify the tax issue posed by the facts presented, and determine the possible tax consequences of each issue that you identify.Hakeem, one of your firm’s clients, is a shareholder in Cedar Corporation. Cedar Corporation has an S corporation election in effect. During the 2021 calendar tax year, the corporation had ordinary taxable income of $200,000, and on January 15, 2021, the corporation paid dividends to shareholders in the amount of $120,000. Hakeem has asked what how much of that he needs to report on his income taxes. Your supervisor has asked you to follow up with Hakeem to get the information needed to make this determination. Write a letter to Hakeem explaining how his taxable income would be calculated and asking for the information that is stilFred Stone is an employee of Henrock Company. During the first part of the year, Stone earned $4,340 while working in State Q. For the remainder of the year, the company transferred him to State S where he earned $27,000. Henrock Company's tax rate in State Q is 4.6%, and in State S, 4.0% on the first $7,000. If reciprocal arrangements exist between the two states, determine the SUTA tax that the company paid on Stone's earnings in State S. Round your answer to the nearest cent.$fill in the blank 1
- Venato Adams is employed to 'Bank of America’ at a salary of $400,000 per month. He receives his rent cheque of $65,000.00 from Merrill Edge a wholly owned subsidiary of ‘Bank of America .’ This cheque is made payable to his wife. Explain the tax implications of this arrangement.Cally, who is married and has one child, owns a bakery. During the 2021 tax year, her Sales $ 55,000, Purchases of trading stock $ 60,000, Business Overheads $ 10,000, Opening Stock Value $ 20,000, Closing Stock Value $ 15,000, Drawings on Trading Stock, use the Commissioner’s standard values Required: Refer to sections in the legislation and/ or cases/ Tax Rulings and answer the following questions: (a) Calculate and explain Cally’s Taxable Income for the 2021 tax year. (b) If Cally hired an electrician to rewire the ovens in her shop, can she also claim his fee of $5,000 as a deduction if, on 30 June 2021, all work had been completed, but Cally is still waiting on his invoice?Hepfer, Inc. is a calendar year-end, accrual method taxpayer. It provides financial services for various clients. Hepfer, Inc. had the following transactions in 2020. Determine the tax treatment for each transaction. For credit, you must round your answer to the NEAREST DOLLAR. Do NOT enter the dollar sign in your answer - only enter the numbers (e.g., X,XXX). For example, one thousand dollars should be entered as 1,000. Enter zero (i.e., “0”) where necessary. (a) Hepfer, Inc. rents a small single house in downtown Dallas and uses it as the business office. On June 15, 2020, Hepfer, Inc. paid $24,000 for the next 12 months of rent. The rental period associated with the payment starts on July 1, 2020. How much (if any) of the payment can Hepfer, Inc. deduct in 2020? $