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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Emerald Health Care Inc. is owned and operated by Dr. Julie Weinstein, the sole stockholder

Emerald Health Care Inc. is owned and operated by Dr. Julie Weinstein, the sole stockholder. During March 2009, Emerald Health Care entered into the following transactions:

March 1 - Received $12,000 from Moloney Company as rent for the use of a vacant office in Emerald Health Care’s building. Moloney paid the rent six months in advance.
March 1 – Paid $5,400 for an insurance premium on a general business policy.
March 6 – Purchased supplies of $1,425 on account.
March 9 – Collected $13,500 for services provided to customers on account.
March 11 – Paid creditors $2,400 on account.
March 18 – Invested an additional $40,000 in the business in exchange for capital stock.
March 20 – Billed patients $37,200 for services provided on account.
March 25 – Received $10,000 for services provided to customers who paid cash.
March 30 – Paid expenses as follows: wages, $18,000; utilities, $5,250; rent on medical equipment, $4,000; interest, $400; and miscellaneous, $1,000.
March 30 – Paid dividends of $3,000 to stockholders (Dr. Weinstein).

Instructions:
Analyze and record the March transactions for Emerald Health Care Inc. using the integrated financial statement framework. Record each transaction by date and show the balance for each item after each transaction. The March 1, 2009 balances for the balance sheet are shown below.


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Bumper Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 1.5/15, net 40

Bumper Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 1.5/15, net 40. If the firm chooses to pay on time but does not take the discount, assuming a 365 day-year, what is the

a. nominal interest cost for passing up (not taking) the credit

b. effective annual percentage cost of its non-free trade credit

Click here for the solution: Bumper Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 1.5/15, net 40

Spinone Corporation directs its sole shareholder to exchange all of his common stock valued at $200,000 (basis of $50,000) for $100,000 of common stock, $80,000 of preferred stock, and $20,000 in cash

Spinone Corporation directs its sole shareholder to exchange all of his common stock valued at $200,000 (basis of $50,000) for $100,000 of common stock, $80,000 of preferred stock, and $20,000 in cash. In addition, Spinone directs its sole bondholder to exchange her $150,000 of bonds paying 6.0% for $170,000 of bonds paying 5.3% How are these transactions treated for tax purposes by the shareholder, the bondholder, and Spinone?

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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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Tanesha is the sole shareholder of Egret Corporation

Tanesha is the sole shareholder of Egret Corporation. Egret’s sales have doubled in the last four years, and Tanesha has determined that the business needs a new warehouse. Tanesha has asked your advice as to whether she should (1) have the corporation acquire the warehouse or (2) acquire the warehouse herself and rent it to the corporation. What are the relevant tax issues that will you will discuss with Tanesha?

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