Emerald Corporation is required to change its method of accounting for Federal income tax purposes. The change will require an adjustment to income to be made over three tax periods. Jonas, the sole shareholder of Emerald Corporation, wants to better understand the implications of this adjustment for E & P purposes, because he anticipates a distribution from Emerald in the current year. Prepare a memo for your firm’s client files describing the results of your research.

Emerald Corporation is required to change its method of accounting for Federal income tax purposes. The change will require an adjustment to income to be made over three tax periods. Jonas, the sole shareholder of Emerald Corporation, wants to better understand the implications of this adjustment for E & P purposes, because he anticipates a distribution from Emerald in the current year. Prepare a memo for your firm’s client files describing the results of your research.

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter1: Introductin To Taxation

Section: Chapter Questions

Problem 17P

See similar textbooks

Similar questions

Petroleum, Inc. is in need of tax consulting services and wants to engage an accounting firm to perform these services on its behalf. The following events have occurred: On December 1, Petroleum, Inc., sent Brick, Waterhouse, & Co. (BW&C) a letter, via overnight delivery, offering to engage BW&C to review Petroleum’s tax situation for the current year for $10,000. In the letter, the company stated that BW&C had ten days to accept. On December 5, BW&C sent an e-mail message that stated, “The price for the tax analysis seems too low. We remain interested in the engagement. Would you consider paying $15,000?” Petroleum received the message without responding immediately. The next day, Smith & Taylor, a BW&C competitor, offered to conduct the tax services for $8,000. On learning of this offer, BW&C immediately e-mailed Petroleum, agreeing to do the work for $10,000. Petroleum received this message on December 7. Explain why BW&C and Petroleum do, or do…
Your qualitative answers should be written in full sentences with depth to your responses when needed. For questions and problems requiring computations, you need to share your supporting calculations. 1a. Jim files his return one month after the due date and pays the remaining $8,000 of tax owed by him. What are his delinquency penalties? 1b. Why is income-shifting considered such a major tax planning concept? 1c. Olivia is being audited by the IRS. The revenue agent determines that certain expenses that were deducted on her return are not valid, and he accordingly makes adjustments to her tax liability. Upon receipt of her 30-day letter, she phones you, a CPA, for advice regarding possible future action on the matter. What options would you discuss with Olivia? 1d. Compute the taxable income for 2020 under each of the following circumstances: Jim is married and files a joint return. Jim and his wife have two dependent children. They have adjusted gross income of $30,000 and…
Chris Green, CPA, is auditing Rayne Co.’s 2019 financial statements. For the year ended December 31, 2019, Rayne is applying GAAP for income taxes. Rayne’s controller, Dunn, has prepared a schedule of all differences between financial statement and income tax return income. Dunn believes that as a result of pending legislation, the enacted tax rate at December 31, 2019, will be increased for 2020. Dunn is uncertain which differences to include and which rates to apply in computing deferred taxes. Dunn has requested an overview of GAAP from Green. Required: Prepare a brief memo to Dunn from Green that identifies the objectives of accounting for income taxes, defines temporary differences, explains how to measure deferred tax assets and liabilities, and explains how to measure deferred income tax expense or benefit.
A new client comes to you in June 2021 and indicates that she instructed her previous accountant in a letter dated January 2020 to file and S election for 2020. It now appears that the prior accountant failed to follow through and make the election. Is there any provision within the Revenue Procedures to have the election apply to the 2020 tax year like the client initially intended? Prepare a memo to the partner of your tax firm explaining the qualifications of an S-election and the procedure for making a late election. [Hint – Rev. Proc. 2013-30]
As a tax consultant you receive on continuous basis inquiries and tax forms from your clients. Following are independent inquires that you have to check and reply back to your clients. For each enquiry below, Comment on whether the given calculations are correct or not by providing the necessary calculations. a-Government A decided to increase the income tax rate from 12% to 16% in year 2021. The total tax base for the year 2020 is $4,200,000. The government is expecting to collect $169,000 additional revenue in year 2021. Quarter of the individual taxpayers decided to quit. The government collected $ 169,000 additional tax revenue.
As a tax consultant you receive on continuous basis inquiries and tax forms from your clients. Following are independent inquires that you have to check and reply back to your clients. For each enquiry below and listed 1 to 4, comment on whether the given calculations are correct or not, explain your answer and give the correct calculations by showing your workings if you disagree. 1. Jurisdiction A imposes income tax on businesses. The income tax is equal to 1% of income up to $ 200,000 and 1.5% of income in excess of $200,000. Nasha Company reported $1,564,000 net income for the year ended December 2020. Nasha's accountant reported an income tax of $23,460. 2. Taxpayer D has taxable income of $172,450. He operates in a Jurisdiction where the tax equals 10% of the first $34,000, 15% from $34,001 to $138,000 and 25% in excess of $138,000. Taxpayer D believes that his average tax rate equals his marginal tax rate of 25%. 3. Taxpayer E lives in a jurisdiction which impose 15% individual…
You are the new controller for Engineered Solutions. The company treasurer, Randy Patey, believes that as aresult of pending legislation, the current 40% income tax rate will be decreased for 2019 to 35% and is uncertainwhich tax rate to apply in determining deferred taxes for 2018. Patey also is uncertain which differences shouldbe included in that determination and has solicited your help. Your accounting group provided you the followinginformation.Two items are relevant to the decisions. One is the $50,000 insurance premium the company pays annuallyfor the CEO’s life insurance policy, for which the company is the beneficiary. The second is that EngineeredSolutions purchased a building on January 1, 2017, for $6,000,000. The building’s estimated useful life is 30years from the date of purchase, with no salvage value. Depreciation is computed using the straight-line methodfor financial reporting purposes and the MACRS method for tax purposes. As a result, the building’s tax basis…
Green Corporation is required to change its method of accounting for federal income tax purposes. The change will require an adjustment to income to be made over three tax periods. Joe, the sole shareholder of Green, wants to better understand the implications of this adjustment for E&P purposes, because he anticipates a distribution from Green in the current year. Explain to Joe the impact of the adjustment on E&P.
Han and Leia have come to you for tax help for their 2023 tax year. What issues does their set of facts present to you as their tax advisor? What advice do you have for them? Please make any assumptions that you need in-order to address and respond to the issues presented by the fact pattern. Clearly state the assumptions that you make. It is advisable to utilize a memorandum style in which you address the facts, issues, analysis, and conclusions. Support your answers with cites to code, regulations, cases, rulings, IRS publications or other research data. 1. In 2023 the Village of Mos Eisley valued the property at $3,150,000 and assessed real property taxes on the both the home and the out-parcels of property. Jobba the Assessor determined that the home represented 30% of the value and the out-parcels represented the remaining 70% of the value for the property. The real estate taxes on the Lake Tatooine property are $31,500 per year.
You are the new accounting manager at the Barry Transport Company. Your CFO has asked you to provide input on the company's income tax position based on the following: Pretax accounting income was $45 million and taxable income was $8 million for the year ended December 31, 2021. The difference was due to three items: Tax depreciation exceeds book depreciation by $30 million in 2021 for the business complex acquired that year. This amount is scheduled to be $60 million in 2022 and to reverse as ($50 million) and ($40 million) in 2023 and 2024, respectively. Insurance of $12 million was paid in 2021 for 2022 coverage. A $5 million loss contingency was accrued in 2021, to be paid in 2023. No temporary differences existed at the beginning of 2021. The tax rate is 25%. Required:1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry.2. Assume the enacted federal income tax law specifies that the tax rate will change from 25%…
Betty Smith is the owner of Accurate Tax Service. For the year ending April 30, 2019, the following information is available for this service business. At the beginning of this accounting period, the balance in the Betty Smith Capital account was $32,000. Following is a summary of activities during this accounting period: Note: You should assume that all profit (or loss) accrued during this accounting period is absorbed into the Betty Smith Capital account at the end of the period. Following are the account balances at the end of this accounting period (except Betty Smith Capital): Solve, a. Prepare an income statement for the year ending April 30, 2019. b. Prepare a balance sheet as of April 30, 2019.
Sarah Keene, CPA, is the newly hired controller for Plexicon, Inc., which is a publicly traded corporation. Ms. Keene's first job with Plexicon was the review of the company's accounting practices on deferred income taxes. In doing her review, she noted differences between tax and book depreciation methods that permitted Plexicon to realize a sizable deferred tax liability on its balance sheet. As a result, Plexicon paid very little in income taxes at that time.\\n\\n Keene also discovered that Plexicon has an explicit policy of selling off plant assets before they reversed in the deferred tax liability account. This policy, coupled with the rapid expansion of its plant asset base, allowed Plexicon to "defer" all income taxes payable for several years, even though it always has reported positive earnings and an increasing EPS. Keene checked with the legal department and found the policy to be legal, but she's uncomfortable with the ethics of it.\\n\\nRequired:\\n\\nWhy would Plexicon…