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

Change in estimate using the reallocation method, Consider the following sc...

Consider the following scenarios: a) Audit fees received by an auditing firm. b) Final ordinary dividend received. Dividends are declared on 31 December and are payable to sh

Example of tax file, Research Problem 2: Carol is a successful physician wh...

Research Problem 2: Carol is a successful physician who owns 100% of her incorporated medical practice. She and her husband, Jared, are considering the purchase of a commercial off

Calculate tax liability, Tax Liability Calculation Morgan (age 45) is singl...

Tax Liability Calculation Morgan (age 45) is single and provides more than 50% of the support of Rosalyn (a family friend), Flo (a niece, age 18), and Jerold (a nephew, age 18). Bo

Assignment(case), its a Canadian tax assignment

its a Canadian tax assignment

Prepare a state tax return, David builds and maintains web applications for...

David builds and maintains web applications for a number of clients. He does a majority of his work from his home office, but he frequently drives to the client site to meet with h

Advanced Tax, The Madison Restaurant was formed a S corporation at the end ...

The Madison Restaurant was formed a S corporation at the end of last year. Bob Buron, owns 60% of the stock, manages the restaurant. Ray Huges owns the remaining 40% of the stock

Tax return project, Help to do the tax return project

Help to do the tax return project

Capital gains tax and inheritance tax issues , Background information J...

Background information Jim set up a limited company; Show the Way Limited (The Company), along with his father in 1983. The company is incorporated in Scotland and has been reg

Case study, Price for 2000 words

Price for 2000 words

Which are the allowances are exempted from the income tax, Q. Which are the...

Q. Which are the allowances are exempted from the income tax? Ans: 1. Uniform Allowance and Sumptuary Allowance 2. Death cum Retirement gratuity received by Government

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