User Account

All Pages

Difficult problem, Taxation

Assignment Help:
Ben Grimm is a 40% partner in We Four, LLC a super-heroing organization. (He
does most of the heavy lifting. Reed has 40%, he is the brains. Sue has
10%--they never see her doing anything. Her brother Johnny has the other 10%--he
gets too hot under the collar to deal with the customers.)

On 1January 2013, his outside basis in his LLC interest was $125,000. This
included his share of liabilities--$75,000. (Reed is always repairing and
inventing gadgets?saving the world is expensive.)

In addition to the operating costs, the insurance premiums alone were six
figures---you try paying for the cost of cleaning up after a visit from Dr.
Doom?they still made a profit. The Company?s a net profit of $300,000 before any
payments to partners.

Reed gets a guaranteed payment of $75,000 (a bit of a stretch, but he does
invent the impossible) and Ben gets a guaranteed payment of $20,000 as a return
on his investment (he used an inheritance form his Aunt Petunia to buy their
headquarters). He gets another $30,000 for his services hitting things?this is a
labor intensive business. Johnny and Sue each get $10,000.

The partnership made distributions during the year to all of the partners. Ben
received:
a. cash of $65,000;
b. inventory with a FMV of $55,000 and a basis of $35,000; and
c. Unrealized receivables with a face value of $25,000 and a basis of $0. These
were all of the outstanding receivables as of year-end.
d. An old Fantasti-car worth $45,000 with an inside basis of $25,000.

The distribution of cash and inventory was pro rata amongst all partners.
However, only Ben received any receivables, the others received additional cash.

Cash flow was good so the company paid off all of its debt at year end.

Ben has come to you to explain what happened?tax wise. Specifically, he asks:

1. What is he supposed to report on his 2013 return? Income, loss, gain???
(Remember, Ben is strong but doesn?t understand a Thing about taxes).
2. What does he do about the inventory? Reed supplemented their income by
selling gadgets to other superheroes (Tony Stark?s equipment is way overpriced).
Ben is thinking about using the equipment in a new side business on Yancey
Street to be called ?Clobber This? where it would be used to help heroes
de-stress. (Already he has had inquiries from Frank Castle, Wolverine and Bruce
Banner). If the business proves less than fantastic, he plans to sell the
equipment.
3. What does he do about the receivables? How will he be taxed and when? How
much? He was told he has no tax until he collects.
4. What is his basis in the car? He plans to use it in his business and wants to
depreciate it. The company had been depreciating it over 5 years using MACRS.
Ben thinks straight line is better; he remembers that from an old accounting
course. What can he do?
5. What is his 31 December 2013 basis in the LLC?
6. Ben would like to transfer a 5% interest to his girlfriend, Alicia as a
gift?although she can?t see why. However, his last accountant, Debbie T. Credit,
said he?ll still get clobbered with the income?what does she mean? Only consider
the income tax consequences, not gift tax.

Related Discussions:- Difficult problem

need help for doing my homwork, I have 95 qustions and I need to get ur he...

I have 95 qustions and I need to get ur help for some of these qustions that I can not do it. the homwork will be avalble just for 2 hours on this Sanday

Define VAT, Define VAT? what is excise? VAT refers for value added tax, tha...

Define VAT? what is excise? VAT refers for value added tax, that is termed as charged on profit earned by firm, for example example: let suppose a business man sells a product of U

Valuation done for other methods, kindly please help me in getting the valu...

kindly please help me in getting the valuation methods under other methods for the assessment year 2012-13.

Deductible amount for AGI, Clem paid self-employment tax of $14,200 and Wan...

Clem paid self-employment tax of $14,200 and Wanda had $3,000 of Social Security taxes withheld from her pay. Determine deductible amount for AGI

Calculate tax liability, Hello, I am  zainab ali, i want help in Tax ass...

Hello, I am  zainab ali, i want help in Tax assignment.. In 2012 Joe, age 15, earned $2900 from acting and had $12,200 of interest income and $14,000 of taxable qualifie

Calculate the market price, In an effort to reduce alcohol consumption, the...

In an effort to reduce alcohol consumption, the government is considering a $1 tax on each gallon of liquor sold (the tax is levied on producers). Suppose that the supply curve for

What are withholding tax?, Ask question #Minimum 100 words accepte

Ask question #Minimum 100 words accepte

Tax liability calculation, The XYZ Corporation has total earnings of $20 mi...

The XYZ Corporation has total earnings of $20 million and decides to pay its stockholders a dividend of $8 million. If the corporate tax rate is 30% and the personal tax rate on in

Toledo ABC Doctors, need tax help requiring tax forms

need tax help requiring tax forms

Service tax, there is significant difference between the average service ta...

there is significant difference between the average service tax collection per assessee in Pune zone and the average service tax collection per assessee in the country

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd