Lucas father is the CEO of a textile company. His father tells him that the company may file for bankruptcy in the near future and suggests Luca sell off his company stock. Luca follows the advice and cashed out. This behavior is an example of?
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- Ray loses his job as a result of a corporate downsizing. Consequently, he falls behind on the mortgage payments on his personal residence. His friend Ted would like to make the delinquent mortgage payments for him. a. Could the payments be structured so that Ray can deduct the mortgage interest? b. Could the payment arrangement deny both Ray and Ted a mortgage interest deduction? c. Could the payments be structured so that Ted can deduct the mortgage interest?Three ladies decide to go into business publishing cookbooks. They form a corporation, having been told that the corporate form of ownership carries limited liability. They decide not to purchase any form of liability insurance for the corporation because their loss in the event of an uninsured liability loss will be limited to the amount of their initial investment. Is there a fallacy in their logic?Kim is in financial difficulty. He owes $5,000 and cannot pay it back now. Should he declare bankruptcy? Why? What do you think he should do?
- Suppose that Ike is loss averse. In the morning, Ike’s stockbroker calls to tell him that he has gained $1,000 on his stock portfolio. In the evening, his accountant calls to tell him that he owes an extra $1,000 in taxes. At the end of the day, does Ike feel emotionally neutral since the dollar value of the gain in his stock portfolio exactly offsets the amount of extra taxes he has to pay? Explain.Niño is very much interested in buying Jasper’s business, but Jasper is not open to the idea of selling his business. Since Niño is used to getting what he wants, he threatened Jasper that he has connections with the Department of Trade and Industry (DTI) and he can have Jasper’s business closed. Out of fear, Jasper sold his business to Niño. What should Jasper do to get back the business? What should be the basis of his remedy?Auchiel and Ben are working in patnership as accountants. Kuria gives auchiel ksh. 100,000 for investment in some good security. Auchiel hides this to co-partner (Ben) and misappropriates the money. Kuria files a suit on the firm for the recovery of his ksh. 100,000 in your opinion, will he succeed? Give reasons.
- An internet investment club asks Jose, a successful stockbroker, to advise its members. The club allows Jose to set up an account with a brokerage firm and gives Jose control of the account, but does not authorize Jose to withdraw funds for his own benefit. Jose, however, uses the money in the account to repay personal loans. He intends to return the money at some point in the future. Jose is charged with embezzlement. Is Jose guilty of embezzlement? Why or why not?Margie and her sister, Jan, each own half of the shares of a closely held business. Margie is concerned about what will happen to the business if Jan dies because Jean just married a man who Margie cannot stand. Jan is also concerned because, although Margie is currently single, she has children from a prior marriage who Jan feels are spendthrifts. Neither sister is ready to quit the business and retire. Neither sister is financially able to pay a gift tax or a capital gains tax. Which one of the following is the most appropriate business transfer technique for Margie and Jan to use in this situation? A) A private annuity agreement between the two sisters B) A cross-purchase buy-sell agreement between the two sisters C) An installment sale contract between the two sisters D) A preferred stock recapitalization of the businessAlexander is a resident of Utah, where gambling is illegal. Alexander visits Goldstrike Casino in Reno, Nevada, and loses all the money he brought with him. Frustrated with his losses and determined to win his money back, Alexander writes a check to Goldstrike drawn on his bank in Utah for $5,000 to obtain more cash so that he can keep gambling. Goldstrike also requires him to sign an agreement guaranteeing that he will repay any money advanced to him. Fortunately, Alexander’s luck turned; he walks away from Goldstrike with $35,000 in his pocket. As soon as he gets home, Alexander issues a stop payment order on the $5,000 check. If Goldstrike files suit against Alexander in Utah to collect its money: a) Goldstrike will win because the full faith and credit clause of the U.S. Constitution requires each state to honor the laws of its sister states. b) Goldstrike will lose because suits over gambling on credit cannot be enforced across state lines. c) Goldstrike…
- Assume you owns stock in a local publicly traded company. Assume also that the stock price has declined since it was purchased two years ago, and you like the long-term prospects for the company. Assume you sel the stock to your sister because you need cash for a down payment on a new home: Would the loss be deductible for you? Assuming you are correct and the stock price increases in the future, how would your sister's gain be computed if she sells the stock? This is a discussion question for Federal Taxation Business EntitiesBradley goes into bankruptcy owing $25,000 as wages to his four employees. There is enough in his estate to pay all costs of administration and enough to pay his employees, but nothing will be left for general creditors. Do the employees take all the estate? If so, under what conditions? If the general creditors received nothing, would these debts be discharged?Mpumi Madonsela has recently qualified to be a Chartered Management Accountant and she is working at one of the big four accounting firms. Due to the limited salary of an article clerk, Mpumi did not contribute to any provident fund. Fortunately for her, the firm contributed to a pension fund on her behalf. She was not content with only a pension fund but was adamant that she wanted a provident fund to supplement her very extravagant lifestyle.Mpumi decided that on 1 January 2019, she would begin contributing to a selected provident fund. Her contributions towards this provident fund will be monthly in arrears. She wanted to get a lump sum pay-out on the retirement date at the age of 65. Mpumi planned to put the lump sum in a money market account at a bank and withdraw a monthly amount for the rest of her life. The monthly amount must be an amount that will be able to maintain two and a half times her 1st-year post article salary. Additional information:1. Mpumi will be turning 26 on 1…
