Arnie, a U.S. citizen who uses the calendar year as his tax year and the cash method of accounting, operates a sole proprietorship in Country Z

C:16-39 Translation of Foreign Tax Payments.

Arnie, a U.S. citizen who uses the calendar year as his tax year and the cash method of accounting, operates a sole proprietorship in Country Z. In Year 1, he reports 500,000 doubles of pretax profits. On June 1 of Year 2, he pays Country Z income taxes of 150,000 doubles for calendar Year 1. Double-U.S. dollar exchange rates on various dates in Year 1 and Year 2 are as follows:

December 31, Year 1 4.00 doubles $1 (U.S.)
Year 1 average 3.75 doubles $1 (U.S.)
June 1, Year 2 4.25 doubles $1 (U.S.)

a. What is the U.S. dollar amount of Arnie’s foreign tax credit? In what year can Arnie claim the credit?
b. How would your answer to Part a change if Arnie elected to accrue his foreign income taxes on December 31 of Year 1, and filed his Year 1 U.S. income tax return on April 15 of Year 2?
c. What adjustment to the credit claimed in Part b would Arnie have to make when he pays his Country Z taxes on June 1 of Year 2?


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Which of the following is an advantage of a sole proprietorship over other business forms

1. Which of the following is an advantage of a sole proprietorship over other business forms?

2. Internet versions of topical tax services include

3. Regulations are

4. Ralph and Yolanda purchased 20% of the initial offering of Major Corporation common stock for $150,000. Major Corporation is a qualifying small business corporation and the stock qualifies as Sec. 1244 stock. Ten months later, Major Corporation files for bankruptcy and the shareholders are notified that the stock is worthless. Ralph and Yolanda, who are married and file a joint return, have a

5. Which of the following is not a step in the tax research process?

6. For Sec. 351 purposes, the term "property" does not include

7. Which of the following is a true statement regarding primary authority of tax law?

8. Which of the following is secondary authority?

9. Which of the following statements about a partnership is true?

10. Identify which of the following statements is true.

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Continuing Cookie Chronicle (CCC1) Solution Natalie Koebel spent much of her childhood learning the art of cookie-making from her grandmother

Continuing Cookie Chronicle
CCC1 Natalie Koebel spent much of her childhood learning the art of cookie-making from her grandmother. They spent many happy hours mastering every type of cookie imaginable and later devised new recipes that were both healthy and delicious. Now at the start of her second year in college, Natalie is investigating possibilities for starting
her own business as part of the entrepreneurship program in which she is enrolled. A long-time friend insists that Natalie has to include cookies in her business plan. After a series of brainstorming sessions, Natalie settles on the idea of operating a cookie-making school. She will start on a part-time basis and offer her services in people’s homes. Now that she has started thinking about it, the possibilities seem endless. During the fall, she will concentrate on holiday cookies. She will offer group sessions (which will probably be more entertainment than education) and individual lessons.
Natalie also decides to include children in her target market. The first difficult decision is coming up with the perfect name for her business. She settles on “Cookie Creations,” and then moves on to more important issues.
Instructions
(a) What form of business organization—proprietorship, partnership, or corporation— do you recommend that Natalie use for her business? Discuss the benefits and weaknesses of each form that Natalie might consider.
(b) Will Natalie need accounting information? If yes, what information will she need and why? How often will she need this information?
(c) Identify specific asset, liability, revenue, and expense accounts that Cookie Creations will likely use to record its business transactions.
(d) Should Natalie open a separate bank account for the business? Why or why not?
(e) Natalie expects she will have to use her car to drive to people’s homes and to pick up supplies, but she also needs to use her car for personal reasons. She recalls from her first-year accounting course something about keeping business and personal assets separate. She wonders what she should do for accounting purposes. What do you recommend?

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