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Predicated on a tax court case, one of the below doctrines was disallowed. What strategy was employed and how was it conducted. based on several important doctrines. 1. The assignment of income doctrine - states that income must be taxed to the entity that renders the service or owns the capital with respect to which the income is paid. 2. The economic substance doctrine - holds that a transaction that changes the taxpayer’s economic situation only for the tax savings from the transaction can be disregarded by the IRS. 3. The business purpose doctrine - a transaction should not be effective or allowed for tax purposes unless it has a business purpose other than tax avoidance. 4. The step transaction doctrine - allows the IRS to collapse a series of intermediate transactions into a single transaction to determine the tax consequences of the arrangement in its entirety US Tax laws are based on several important doctrines.
The income doctrine - states that income must be taxed to the entity that renders the service or owns the capital with respect to which the income is paid. The economic substance doctrine - holds that a transaction that changes the taxpayer’s economic situation only for the tax savings from the transaction can be disregarded by the IRS. The business purpose doctrine - a transaction should not be effective or allowed for tax purposes unless it has a business purpose other than tax avoidance. The step transaction doctrine - allows the IRS to collapse a series of intermediate transactions into a single transaction to determine the tax consequences of the arrangement in its entirety. To perform professional tax planning, we adhere to several maxims. First we need to analyze the variables that determine the tax consequences of a transaction. Then we apply one or more of the following tax planning maxim strategies that reduce tax and enhance cash flows: Generate income in a lower tax rate entity – tax costs decrease. Defer taxes - shift income to a future year when rates are lower, or move expenses forward to the current year when tax rates are higher or they can decrease income. Generate income in a lower tax jurisdiction - tax costs decrease when income is taxed at a lower tax rate. Change the character of the revenue - tax costs decrease when income is taxed at a preferential rate because of its character.
What condition is necessary for the warrants to be exercised? How much total money will the company raise as a result of this security issue, if all warrants are exercised?
Each financial decision made by a corporate manager can be evaluated by its direct impact on the corporation's stock price.
IBM is thinking about issuing a bond in Europe and swapping the annual payments back to US dollars. If fixed rates are 7% in Europe and 9% in the US and the current exchange rate is 1.40 Dollars to every Euro then:
Suppose the price of a stock is $100 a share. A call option on the stock with two months until expiration date and exercise price $105 sells for $2. A put on the stock with the same strike price and expiration date sells for $7. What is the market pr..
Explain the concept of management control and how budgeting is used as part of it - Describe the concept of zero-base budgeting.
What major factors should the company be aware of as it evaluates possible investment projects in the future? Would you be interested in investing in this company? Why or why not? Are there additional factors that aren't a part of this case that you..
Gangland Water Guns, Inc. is expected to pay a dividend of $2.10 one year from today. If the firm's growth in dividends is expected to remain at a flat 3 percent forever, then what is the cost of equity capital for Gangland if the price of its common..
During the year, the firm sold assets with a total book value of $13,600 and also recorded $14,800 in depreciation expense. How much did the company spend to buy new fixed assets?
Assume that the division is using variable costing. How many units should be scheduled for production during the last quarter of the year? (The basic formula for computing the required production for a period in a company is Expected sales + Desired ..
Emily Dorsey's current salary is $74,000 per year, and she is planning to retire 27 years from now. She anticipates that her annual salary will increase by $2000 each year ( $74000 first year, $76000 second year...) and she plans to deposit 10% of he..
Buddy owns 100 of the outstanding shares of Binder Corporation stock. Buddy's basis in his Binder Corporation stock is $100,000. Binder Corporation is merged with Clipper Corporation in a tax-free reorganization. Buddy and Bruce each own 25% of Clip..
The camera you want to buy costs $365 in the U.S. If absolute purchasing power parity exists, the identical camera will cost _____ in Canada if the exchange rate is C$1 = $0.7527. C$274.74 C$486.25 C$484.92 C$363.67 C$483.59 The current spot rate is ..
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