76. Tony and Susan are starting a retail business selling formal wear for men and women.

76. Tony and Susan are starting a retail business selling formal wear for men and women.

76. Tony and Susan are starting a retail business selling formal wear for men and women.They estimate profits and losses for the next five years to be: ($20,000), ($10,000),($5,000), $10,000, and $50,000 respectively. Susan will work full time in the storewhile Tony will be involved in managing the operations. Susan is married to Tom andis in the 28% marginal tax bracket. Tony is single and has other sources of income thatput him in the 28% marginal tax bracket. Susan will be paid a salary of $30,000 forthe first five years, after which her compensation will be reviewed. Tony and Susaneach contribute $50,000 to get the business started. The remaining question facingTony and Susan is which business form to use for the business. They believe theyshould operate as a partnership but have been informed that forming a corporationmight be a better option since it would limit their liability. Prepare an analysis todetermine whether Tony and Susan should operate their business as a partnership or acorporation.77. Tory, Becky, Hal, and Jere form TBHJ Partnership as equal owners. TBJH Partnershiprents heavy tools and equipment. Becky and Hal are married to each other while Toryand Jere are brothers but are not related to Becky or Hal. Because Becky and Hal haveother jobs, Tory and Jere are to be the full-time managers of the business. Although Toryand Jere will run the business full-time, Becky will help in the store on weekends and someevenings. Hal will lend his financial expertise to the firm by doing the bookkeeping andpreparing the tax returns. Even though the four have equal ownership interests, it is notclear how each owner is to be compensated so that there is equity among the partners yetrewards for those engaged in specific tasks. Hal has told the others that they cannotreceive deductible salaries. However, he suggests that guaranteed payments be made toeach partner/employee for an agreed-upon amount based on the value of the services eachprovides and/or the time spent at the store. Discuss the ramifications of employing thisplan and whether this is an equitable way to allocate compensation among the partners.What are the implications of this arrangement for the partners and the partnership?In each of the following problems, identify the tax issue(s) posed by the facts presented.Determine the possible tax consequences of each issue that you identify.57. Lydia owns 75% of Flower Farms, a partnership. She also owns land that she leases toFlower Farms for $6,000 per month.58. Michael buys a piece of property from JFK Partnership for $60,000 that has a$70,000 basis. Michael owns 80% of JFK partnership.59. Irene contributes land to Micro Development Partnership for a 30% interest. Thelands basis is $20,000, and it has a fair market value of $80,000. Micro reports a netoperating loss of $100,000 for the year. Irene devotes at least 12 hours a week to managingthe partnership operations.60. Powell owns a 20% interest in Cooke Partnership. At the beginning of 2010, Powellsbasis is $22,000. Cooke reports a $90,000 operating loss in 2010, and Powell withdraws$10,000 from the partnership. Cookes 2011 operating income is $70,000, andPowell withdraws $10,000 from the partnership.61. Ramrod, Inc., sells a warehouse for $350,000. It purchased the warehouse 10 years agofor $250,000 and had taken $75,000 in depreciation on the building to the date of sale.62. Myrtle Coast Corporation has a $35,000 operating loss during the current year. Notincluded in the loss is a $40,000 dividend it received from a corporation in which itowns a 15% interest.63. LMC, Inc., is equally owned by Larry, Maurice, and Charles. The owners are sportsagents. LMCs income consists solely of fees from the owners clients. During thecurrent year, LMCs net income from operations is $380,000, and it receives $20,000in interest income. The corporation owns an interest in a limited partnership that generatesa $24,000 loss in the current year.64. Assume the same facts as in problem 63, except that LMC, Inc., is an electing Scorporation.65. Kummell Corporation reports a $200,000 taxable income in the current year.Included in the taxable income calculation are $20,000 in dividends received fromless-than-20%-owned corporations, and $30,000 in charitable contributions.66. Milena owns a 25% interest in Davis Company, an S corporation. Her basis in theDavis stock is $40,000. Davis reports an operating loss of $200,000 in the currentyear. Davis owes Milena $25,000 on a loan she made to the company several yearsago.67. Charlene owns a 70% interest in Maupin Mopeds, which is organized as a partnership.She wants to open another business and needs office space for it. She hasMaupin distribute a building worth $150,000 to her in lieu of her normal cash distribution.Maupins basis in the building is $55,000. Charlenes b


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