AC507 Unit 1 Assignment
12. What are three characteristics of a sole proprietorship? Are these characteristics the same as or different from those of a partnership? What are three characteristics of a limited liability company that differ from those of a partnership?
19. The Warner Corporation has gross income of $560,000. It has business expenses of $325,000, a capital loss of $20,000, and $2,500 of interest income on temporary investments. What is the corporation’s taxable income?
30. Hunter Corporation has $250,000 in gross income, $125,000 in deductible business expenses, and a $12,000 business tax credit. Determine the corporation’s net tax liability.
36. June and John decide to form a business. They each plan to contribute $20,000 in exchange for a 50 percent interest in the business. They will then take out a bank loan for $30,000 to cover the balance of their working capital needs. They expect that the business will make a profit of $64,000 in the first year and that it will not make any cash distributions that year. Excluding the business income, June, who files as head of house- hold, has $480,000 of salary income and $450,000 of taxable income. John is married and files a joint return; he and his wife have $120,000 of combined salary income and $100,000 of taxable income. They want to know how much tax the business will pay and how much additional tax they will personally pay in 2013 if they form the business as a partnership, S corporation, or C corporation. Consider only income taxes.
71. Carol has recently incorporated her sole proprietorship and is considering making an S election. The corporation has $200,000 of gross revenue and expenses of $75,000 before Carol’s salary. She plans to take a gross salary of $60,000 from the business and this will be her only income for the year. Compare the total tax burden for Carol and the corporation with and without the S election. Consider both income and employment taxes. Carol is single and does not itemize her deductions. She plans to reinvest all of the corporation’s net income after taxes into the business. Based on tax burden alone for 2014, should Carol make the S election?