Open Question: Business Taxation Class Problem?
September 5, 2010 by
Filed under loans
PROBLEM 1
Walt provides you with the following information.
Bank interest income 5,000
Business debt forgiven3,000
Business property taxes2,500
City of Troy Bond Interest9,000
DPAD 3,200
Earned Income110,000
Interest paid on business loan1,800
Life insurance proceeds50,000
Long-term capital gain3,000
Home interest expense5,000
Personal property taxes2,300
Political Contributions1,500
Business rental expense24,000Paid rent for 2 years, this year and next year
Prepaid interest income 8,000Prepaid interest for 3 years, the is year and next 2 years
Sale to solely owned Corporation (4,500)
Short-term capital loss11,000
State personal income taxes4,200
Stock value increase3,300
Tax penalties900
Charitable Contributions: All given to qualified charities
DescriptionFMVAdj. Basis
Computers* 12,0008,000
Jewelry#6,0001,000
Clothes*1,5006,000
Stock (C/G prop)#5,0003,000
Car (C/G prop)*2,00017,000
* used in charitable function
# not used in charitable function
A.Assuming that Walt is single, determine the following:
Gross Income:
Adjusted Gross Income:
From AGI Deductions:
Taxable Income:
Carryovers:
B. If Walt was a corporation rather than an individual, what would be its taxable income and carryovers (assume that the corporation would not have the personal expenses but would have the charitable contributions)?
C.If the “Earned Income” was Walt’s salary, compute FICA, Medicare, and FUTA (3%) paid by Walt’s employer?
D.Suppose that in the next year, Walt receives a state tax refund of $1,000. How is this treated for tax purposes?
E. What is the highest (marginal) tax rate for Walt on his ordinary income and capital gains in part A?
F. What is the highest (marginal) tax rate for Walt Corporation’s ordinary income and capital gains in part B?
This wasn’t homework. It’s optional just so I can practice how to do them before the test in two weeks. I just thought I’d get a headstart and if someone could show me a way to do it that would really help. This isn’t graded, it was just for my knowledge.
Thanks anyway.