Federal Taxation

1.      
Why would December 31 be an inappropriate year-end for a ski resort?

2.      
2. In the case of a profitable S corporation, what would be the advantage to using a tax year ending January 31 if this was permissible?

3.      
3. A medical practice was incorporated on January 1, 20X7, and expects to earn $25,000 per month before deducting the doctor’s salary. The doctor owns 100% of the stock. The corporation and the doctor both use the cash method of accounting. The corporation does not need to retain any of the earnings in the business; thus, the salary of the doctor (a calendar year taxpayer) will equal the corporation’s net income before salary expense. If the corporation could choose any tax year it wished and pay the doctor’s salary at the time that would be the most tax efficient (but at least once every 12 months), what tax year should the corporation choose, and when should the salary be paid each year?

4.      
4. Pale Motel, Inc., was a C corporation using a fiscal year ending April 30 for tax purposes for all tax years through April 30, 20X7. In May 20X7, the corporation made an S election. What are the implications of the election for Pale’s tax year?

5.      
5. A cash basis taxpayer owns rental properties. The insurance on the properties is renewed each January 1. On December 30, 20X7, the taxpayer paid the premium of $24,000 for the period January 1, 20X8, through December 31, 20X8. Can the taxpayer deduct the premium of $24,000 in 20X7?

6.      
6. Compare the cash basis and accrual basis of accounting as applied to the following:

a.      
Fixed Assets

b.      
Prepaid rent income

c.      
Prepaid interest expense

7.      
7. Edgar uses the cash method to report the income from his software consulting business. A large publicly held corporation has offered to invest in Edgar’s business as a limited partner. What tax accounting complications would be created if Edgar and the corporation become partners?

8.      
11. The Eagle Corporation builds yachts. All vessels are practically identical and sell for more than $2 million. Production does not begin until the company has a contract to sell the vessel. The company has recently changed its production techniques to reduce the time for producing a yacht from 15 months to 9 months. What are the accounting method implications of the change?

9.      
12. How can a company using LIFO for tax purposes disclose to shareholders the net income for the tax year computed under FIFO 
without violating the LIFO conformity provisions?

10.  
14. What accounting method (cash or accrual) would you recommend for the following businesses?

a.      
An incorporated medical practice with annual gross receipts of $12 
million

b.      
A hardware store with annual gross receipts of less than $1 
million.

c.      
A building contractor, who builds single-family houses, with annual 
gross receipts of $3 million.

 

d.      
A grocery store with annual gross receipts of $4.5 million.

Click here to request for this assignment help