1. Corp A wishes to acquire the business of Corp T. Corp T stock is worth $650 million, and its shareholderscumulatively have a tax basis of $300 million in the Corp T shares. Corp T has no debt, very little cash, and assets with acumulative tax basis of $100 million. Assume the Corp T shareholders don't want to pay tax on their gain. Whichtransactions are available in the following scenarios?a. Corp A is willing to use only its voting stock to acquire Corp Tb. Corp A wants to use its stock to acquire only 80% of Corp T, and pay cash for the rest, and it needs Corp T tocontinue in existence (due to valuable licenses Corp T holds)c. Corp A wants to acquire the assets of Corp T for itself and have Corp T go out of existenced.Corp A wants one of its subsidiaries to acquire the assets of Corp T

The acquisition is when one company wants to overtake or acquire another. If voting rights are to be…

Answered: 1. Corp A wishes to acquire the…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter6: Accounting For Financial Management

Section: Chapter Questions

Problem 8P

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a. What is the relative tax advantage of corporate debt if the corporate tax rate is TC=0.22, the personal tax rate on interest is TpD=0.37, but all equity income is received as capital gains and escapes tax entirely ( TpE=0 )? b. How does the relative tax advantage change if the company decides to pay out all equity income as cash dividends that are taxed at 10% ? Note: Do not round intermediate calculations. Round your answers to 4 decimal places.
Which of the following is TRUE of capital gains taxes for domestic corporations? A. They are exempt from capital gains tax. B. The capital gains are taxed at corporate income tax rate. C. Capital gains tax are taxed at a fixed rate of 6%. D. No capital gains tax if the sale resulted to a capital loss.
1. Gain on sale of shares of domestic corporation directly sold to a buyer is subject to what kind of tax? * a. Basic Income Tax (BIT) b. Capital Gains Tax (CGT) c. 8% Preferential Tax d. Real Property Tax (Local Tax) e. None of the abovementioned choices 2. Gain on sale of an unlisted shares from a non-listed Domestic Corporation is subject to what kind of tax? a. Basic Income Tax (BIT) b. Capital Gains Tax (CGT) c. 8% Preferential Tax d. Real Property Tax (Local Tax) e. None of the abovementioned choices 3. Gain on sale of shares of a closely-held corporation is subject to what kind of tax? a. Basic Income Tax (BIT) b. Capital Gains Tax (CGT) c. 8% Preferential Tax d. Real Property Tax (Local Tax) e. None of the abovementioned choices
From a corporation's point of view, does the tax treatment of dividends and interest paid favor the use of debt financing or equity financing? O Debt financing Equity financing You bought 1,000 shares of Tund Corp. stock for $60.59 per share and sold it for $82.35 per share after a few years. How will your gain or loss be treated when you file your taxes? will O As a capital gain taxed at the long-term tax rate O As a capital gain taxed at the current ordinary-income tax rate Depreciation expenses directly affect a company's taxable income. An increase in depreciation expense will lead to a tax deducted from a company's earnings, thus leading to a operating cash flow. According to a tax law established in 1969, taxpayers must pay the The applicable tax rate for S corporations is based on the: Stockholders' individual tax rates O Corporate tax rate taxable income. It of the Alternative Minimum Tax (AMT) or regular tax.
Which of the following statements is false? A. A corporation must file a Federal income tax return even if it has no taxable income for the year. B. Dividend received deduction is calculated as the dividend received times deduction percentage. C. A corporation cannot deduct net capital losses against its operating income. D. A C corporation with taxable income of $100,000 in the current year will have a tax liability of $21,000. E. Schedule M-1 is used to reconcile net income as computed for financial accounting purposes with taxable income reported on the corporation's income tax return.
Indigo Corporation wants to transfer cash of $150,000 or property worth $150,000 to one of its shareholders, Linda, in a redemption transaction that will be treated as a qualifying stock redemption. If Indigo distributes property, the corporation will choose between two assets that are each worth $150,000 and are no longer needed in its business: Property A (basis of $75,000) and Property B (basis of $195,000). a. Compute Indigo’s recognized gain or loss if it distributes Property A in redemption of Linda’s shares. b. Compute Indigo’s recognized gain or loss if it distributes Property B in redemption of Linda’s shares. c. Compute Indigo’s recognized gain or loss if it sells Property B to an unrelated party and then distributes the sale proceeds in redemption of Linda’s shares.
Requirements a. What is Sigma Corporation's income tax liability assuming its taxable income is (a) $82,000, (b) $123,000, and (c) $55 million. b. How would your answers change if Sigma were a personal service corporation? Requirement a. (a) What is Sigma Corporation's income tax liability assuming its taxable income is $82,000. ma Corporation's income tax liability = Requirement a. (b) What is Sigma Corporation's income tax liability assuming its taxable income is $123,000. pted Sigma Corporation's income tax liability Requirement a. (c) What is Sigma Corporation's income tax liability assuming its taxable income is $55 million. (Enter your answer in dollars, not millions.) = Sigma Corporation's income tax liability: = Requirement b. How would your answers change if Sigma were a personal service corporation? (a) Assume its taxable income is $82,000. Sigma Corporation's income tax liability as a personal service corporation : = (b) Assume its taxable income is $123,000.
What is the relative tax advantage of corporate debt if the corporate tax rate is Tc=0.35, the personal tax rate is Tp=0.35, but all equity income is received as capital gains and escapes tax entirely ( T pE =0)? How does the relative tax advantage change if the company decides to pay out all equity income as cash dividends that are taxed at 15%?
Calculate Anaheim Corporation's excess net passive income tax in each of the following alternative scenarios: Note: Leave no answer blank. Enter zero if applicable. c. Passive investment income, $100,000; expenses associated with passive investment income, $40,000; gross receipts, $120,000; taxable income if a C corporation, $40,000; corporate Earnings and profit, $0. Excess net passive inocme tax?
Corporate Corporations earn most of their income from operations; however, they may also receive interest and dividend income. Interest income is taxed as ordinary income; however, dividend✔✔✔ income is taxed more favorably. 70% of dividends ✔received is excluded from taxable income, while the remaining 30% is taxed at the ordinary tax rate. For businesses, interest ✔✔✔ payments are regarded as an expense so they are tax deductible; however, dividend payments are not tax deductible. Consequently, our tax system encourages debt ✔✔✔ financing over equity v financing. Depreciation expense is tax deductible, so the larger the depreciation, the lower the taxable income, the lower ✔✔✔ the taxes, and the higher ✔the firm's operating cash flow. The projected 2013 tax rate schedule for corporations is shown below. If a Corporation's Taxable Income Is Up to $50,000 $50,000 - $75,000 $75,000 - $100,000 $100,000 $335,000 $335,000 $10,000,000 $10,000,000 - $15,000,000 $15,000,000 - $18,333,333 Over…
Which statement below is incorrect in relation to the taxation of companies? A.Companies are not entitled to a discount on capital gains B.Dividends paid by a company are included in the assessable income of resident shareholders C.The (flat) rate of tax for companies is 30% (unless entitled to a lower rate of corporate tax) D.Companies are entitled to a 50% discount in capital gains
A resident company pays a partly franked dividend of $700 (80% franked) to a resident shareholder. Explain the Income Tax implications of the shareholder if he/she is: (a) an Individual who is subject to the Top Marginal Tax rate. ( (b) an Individual with Marginal Tax rate of 15%. ,- .., (c) a company with other Assessable Income of $100,000 and a carried forward loss of $40,000.. (d) a comnanv with other Assessable Income of $88,000 and deductions of $7,000. (e) a partnership with two (2) resident Individual partners sharing partnership profits or losses equally.

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