Bluegrasss economic slide worsens and bankruptcy results

Assignment Help Financial Management

Reference no: EM13721986

Sarah is the sole owner of Bluegrass Corporation. The basis and value of her stock investment in Bluegrass are approximately $100,000. In addition, she manages Bluegrass's operations on a full-time basis and pays herself an annual salary of $40,000. Because of a recent downturn in business, she needs to put an additional $80,000 into her corporation to help meet short-term cash-flow needs (e.g., inventory costs, salaries, and administrative expenses). Sarah believes that the $80,000 transfer can be structured in one of three ways: as a capital contribution, as a loan made to protect her stock investment, or as a loan intended to protect her job. From a tax perspective, which alternative would be preferable in the event that Bluegrass's economic slide worsens and bankruptcy results? Explain your answer.

Partial list of research aids:

Kenneth W. Graves, 87 TCM 1409, T.C.Memo. 2004–140.

Reference no: EM13721986

Questions Cloud

What is the yield to maturity-treasury strips : A Treasury STRIPS is quoted at 61.159 and has 11 years until maturity. What is the yield to maturity? (Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Individual causes of resistance to change : • Identifying both organizational and individual causes of resistance to change. • Describe how Lewin's theory of change can be used to overcome resistance to change.

What is the cross-rate in terms of yen per pound : Suppose the Japanese yen exchange rate is ¥89 5 $1, and the British pound exchange rate is £1 5 $1.62. What is the cross-rate in terms of yen per pound?

Spot exchange rate for the canadian dollar : Suppose the spot exchange rate for the Canadian dollar is Can$1.04 and the six-month forward rate is Can$1.06. Which is worth more, a U.S. dollar or a Canadian dollar?

Bluegrasss economic slide worsens and bankruptcy results : Sarah is the sole owner of Bluegrass Corporation. The basis and value of her stock investment in Bluegrass are approximately $100,000. In addition, she manages Bluegrass's operations on a full-time basis and pays herself an annual salary of $40,000.

Domino case study : 1. Read the Domino's Case Study in Case Study section of the text. 2. Write a summary of the case study. Be sure to discuss reasons why Domino's would use an acquisition strategy to achieve strategic competitiveness.

Summarize the paper on focusing on the customer : Operations and project management is key, and it's not something that is just innate to most people, it's something that's developed over time. I have one operations manager that comes to mind as the pinnacle-he sets the standard for operations a..

Relationship among corporate structure : Analyze the relationship among corporate structure, corporate governance and corporate strategy: What is the UFC's corporate level strategy? Be sure to define any key terms.

What are current assets : McConnell Corp. has a book value of equity of $13,205. Long-term debt is $8,200. Net working capital, other than cash, is $3,205. Fixed assets are $17,380. How much cash does the company have? If current liabilities are $1,630, what are current asset..

User Account

All Pages