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Question - Eric Wright conducts a dry cleaning business as a sole proprietorship. The business operates in a building that Eric owns. Last year, Eric mortgaged for $150,000 the building and the land on which the building sits. He used the money for a down payment on his personal residence and college expenses for his two children. He now wants to incorporate his business and transfer the building and the mortgage to a new corporation, along with other assets and some accounts payable. The amount of the unpaid mortgage balance will not exceed Eric's adjusted basis in the land and building at the time he transfers them to the corporation. Eric is aware that Sec. 357(b) could impact the tax consequences of the transaction because no bona fide business purpose exists for the mortgage transfer, which the IRS might consider to have been for a tax avoidance purpose. However, Eric refuses to acknowledge this possibility when you confront him. He maintains that many taxpayers play the audit lottery and that, in the event of an audit, invoking this issue could be a bargaining ploy.
What information about the transaction must be provided with the transferor and transferee's tax returns for the year in which the transfer takes place? Discuss the ethical issues raised by the AICPA's Statements on Standards for Tax Services No. 1, Tax Return Positions (which can be found in Appendix E) as it relates to this situation. Should the tax practitioner act as an advocate for the client? Should the practitioner sign the return?
Trained as a mining engineer, David has developed considerable expertise in the treatment and disposition of waste material. He also is well versed in the federal and state requirements for land reclamation projects
On April 1 of year 0 Stephanie received a $9,000 payment for full payment on a three-year service contract. What amount of income Stephanie recognize in year
1) Which of the following entries would be used to record the billing of fees earned? 2) If total liabilities are $1,000 and total assets are $8,000, owner's equity must be:
Determine the earnings per share for each company and evaluate the relative profitability of the two companies.
The production department described in Exercise 20-8 had $531,480 of direct materials and $407,689 of direct labor cost charged to it during April.
Provide the appropriate journal entries, assuming that Harry takes one-week annual leave after being employed for one year
at the market close on february 19 2010 mcdonalds corporation had a closing stock price of 64.74. in addition
anson Co. a calendar-year taxpayer, Are there any tax elections that Nanson may make to deal with this problem? Explain
What are the combined total department costs for the producing departments after allocating the service department costs
Khyber Corporation follows generally accepted accounting principles in accounting for uncollectible. Prepare the journal entry to write off the Abid Ali account
Raymond provides the following information related to assets used in a trade or business which have been sold in 2011. All assets have been held for over one year.
At what point does a tax lien attach to the property? What interest charges and other penalties or fees are assessed to the delinquent taxpayer?
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