b-3. Assume James and Paul formed GTE as an LLC. 1. Compute the tax basis of Paul's ownership interest in GTE at the end of 2023. 2. What amount of Paul's income from GTE is subject to FICA or self-employment taxes? 3. What amount of income, including its character, will Paul recognize on the $23,000 distribution he receives on December 1? 4. What amount of tax does GTE pay on the $1,600 qualified dividend it received? 1. End of Year Stock Basis 2. Paul's income 4. Tax
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- Required Information While James Craig and his former classmate Paul Dolittle both studied accounting at school, they ended up pursuing careers in professional cake decorating. Their company, Good to Eat (GTE), specializes in custom-sculpted cakes for weddings, birthdays, and other celebrations. James and Paul formed the business at the beginning of 2023, and each contributed $140,000 in exchange for a 50 percent ownership Interest. GTE also borrowed $560,000 from a local bank. Both James and Paul had to personally guarantee the loan. Both owners provide significant services for the business. The following information pertains to GTE's 2023 activities: • GTE uses the cash method of accounting (for both book and tax purposes) and reports Income on a calendar-year basis. • GTE received $900,000 of sales revenue and reported $420,000 of cost of goods sold (it did not have any ending Inventory). • GTE paid $75,000 compensation to James, $75,000 compensation to Paul, and $85,000 of…Skip to question While James Craig and his former classmate Paul Dolittle both studied accounting at school, they ended up pursuing careers in professional cake decorating. Their company, Good to Eat (GTE), specializes in custom-sculpted cakes for weddings, birthdays, and other celebrations. James and Paul formed the business at the beginning of 2023, and each contributed $140,000 in exchange for a 50 percent ownership interest. GTE also borrowed $560,000 from a local bank Both James and Paul had to personally guarantee the loan. Both owners provide significant services for the business. The following information pertains to GTE's 2023 activities: GTE uses the cash method of accounting (for both book and tax purposes) and reports income on a calendar-year basis. GTE received $900,000 of sales revenue and reported $420,000 of cost of goods sold (it did not have any ending inventory). GTE paid $75,000 compensation to James, $75,000 compensation to Paul, and $85,000 of compensation to…Tom & Dick go into business together as partnership, selling computer software through the internet. On January 1, they each put in $6,000 as capital, and this goes into the Tom&Dick account at their local bank. They buy computer equipment for $10,000 (paid by cheque) and set up for business in Dick’s dad’s basement. The cost of the computer equipment will be amortized over the next three years, with a disposal value of $1,000. Dick’s dad has agreed to let them operate out of his basement if they pay him a rent of 10% of their annual profit, or $1,200 per year, whichever is greater. At this point the total asset is: A. $6,000.00 B. $12,000.00 C. $10,800.00 D. $22,000.00 E. There is no possible answer
- Ahmed for Mujeeb Leasing for several years. Muscat Leasing is a company that leases high-tech medical equipment to hospitals. Ahmed for Mujeeb have decided that, with their financial expertise, they might start their own company to provide consulting services to individuals interested in leasing equipment. One form of organization they are considering is a partnership. If they start a partnership, each individual plan to contribute OMR50,000 in cash. In addition, Ahmed has a used computer that originally cost OMR370, which he intends to invest in the partnership. The computer has a present market value of OMR150.Although both Ahmed for Mujeeb are financial wizards, they do not know a great deal about how a partnership operates. As a result, they have come to you for advice. What type of document is needed for a partnership, and what should this document contain?Required information [The following information applies to the questions displayed below.] Sandy and John Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2023, Sandy worked as a computer technician at a local university earning a salary of $153,300, and John worked part time as a receptionist for a law firm, earning a salary of $30,300. Sandy also does some Web design work on the side and reported revenues of $5,300 and associated expenses of $1,400. The Fergusons received $1,060 in qualified dividends and a $265 refund of their state income taxes. The Fergusons always itemize their deductions, get the full benefit of deducting the entire amount of state income taxes paid, and their itemized deductions were well over the standard deduction amount last year. Use Exhibit 8-10, Tax Rate Schedule, Dividends and Capital Gains Tax Rates, 2023 AMT exemption for reference. The Fergusons reported making the following payments during the year: State income…Tom and Davidson go into business together as a partnership selling computer software through the Internet. On January 1 they each put $6,000 as capital and this goes into their local bank account for the company. They bought computer equipment for $10,000 in which they paid by check and set up for business in Davidson's dad's basement. The cost of computer equipment will be amortized over the next three years with a disposable value of $1000. Davidson's dad has agreed to let them operate out of his basement if they pay him a rent of 10% of their annual profit or $1,200 per year whichever is greater. At the end of the first month of business, they have made no sales and incurred no expenses other than the amortization rate of the computer equipment and the rent which is owed to Davidson's dad. At the end of January, what is the accounting equation (assets, liabilities and equity)
- 6.Matthew and Venice decide to form their new retail business as an LLC. Each will receive an equal profits (loss) interest by contributing cash, property, or both. In addition to the members' contributions, their LLC will obtain a $35,000 nonrecourse loan from Simple Bank at the time it is formed. Matthew contributes cash of $4,000 and a building he bought as a storefront for the retail. The building has an FMV of $65,000 and an adjusted basis of $29,000 and is secured by a $34,000 nonrecourse mortgage that the LLC will assume. What is Matthew's outside tax basis in his LLC interest? Show computation.Yash and Ankita decided to invest money in this joint venture, which they called Alkaline. Both of them invested *1,50,000 each in the company on 1st April. After the investment, they used the money from the company to buy a website domain name on the internet for alkaline.com from GoDaddy.com on 3rd April. This cost them 3,000. Since they both decided to work from home, there was no point in renting out an office space just yet. However, the production of beauty products would require a factory of sorts. Since they were just starting out, they rented half a floor of an already operating factory on the 5th of April for ₹16,000 per month from Mr Bhuvan. Their next order of business was to procure raw materials to manufacture the beauty products. They drove across town and met various vendors to get the cheapest deal available. Because they did not want to get all their raw materials from different places, they compromised on the price a little and bought all the raw materials from one…William Murray achieved one of his life-long dreams by opening his own business. The Coronado Driving Range, on May 1, 2025. He invested $24,100 of his own savings in the business. He paid $6,850 cash to have a small building constructed to house the operations and spent $860 on golf clubs, golf balls, and yardage signs. Murray leased 4 acres of land at a cost of $1,320 per month. (He paid the first month's rent in cash.) During the first month, advertising costs totaled $760, of which $200 was unpaid at the end of the month. Murray paid his three nephews $400 for retrieving golf balls. He deposited in the company's bank account all revenues from customers ($5,260). On May 15, Murray withdrew $810 in cash for personal use. On May 31, the company received a utility bill for $190 but did not immediately pay it. On May 31, the balance in the company bank account was $18.560. Murray is feeling pretty good about results for the first month, but his estimate of profitability ranges from a…
- Santana Rey created Business Solutions on October 1, 2019. The company has been successful, and Santana plans to expand her business. She believes that an additional $86,000 is needed and is investigating three funding sources. a. Santana’s sister Cicely is willing to invest $86,000 in the business as a common shareholder. Because Santana currently has about $129,000 invested in the business, Cicely’s investment will mean that Santana will maintain about 60% ownership and Cicely will have 40% ownership of Business Solutions. b. Santana’s uncle Marcello is willing to invest $86,000 in the business as a preferred shareholder. Marcello would purchase 860 shares of $100 par value, 7% preferred stock. c. Santana’s banker is willing to lend her $86,000 on a 7%, 10-year note payable. She would make monthly payments of $1,000 per month for 10 years. Required 1. Prepare the journal entry to reflect the initial $86,000 investment under each of the options (a), (b), and (c). 2. Evaluate the three…Tom and Mary are running a beauty parlor business since year 2010. Their capital balances on 31 st December, 2015 were 380,000 and 360,000. On this date, they have decided to add Peter as a new partner in the business. Peter is a young man and has earned a great reputation in the field of fashion and parlor work due to her foreign qualification and experience. Peter invests equipment 90,000 and sufficient cash for one third interest in the business. Peter invests cash 400,000 and is to receive a one half interest in the partnership. Tom and Mary decided to maintain their level of capital in the partnership business. Peter invests cash 300,000 and is to receive a one fourth interest in the business. After her admission, total capital of the partnership business is to be 1,200,000. Peter purchased a one third interest of Mary for 110,000 and a one fourth interest of Tom for 100,000 cash. Required Journal entries in respect of Peter admission in the business under the above casesKATY, a sole proprietor wanted to expand her profitable business but she does not have enough resources. So, she thought of inviting PERRY to join her and formed a partnership on April 1, 2020. Just before admission, KATY had the following assets and liability accounts: Cash - ₱420,000; Accounts receivable -₱380,000; Inventories -₱250,000;Notes payable -₱100,000. PERRY agreed to contribute cash equal to 30% of KATY’s capital after considering the following adjustments: (a) 2% allowance for bad debts should be recognized, (b) the inventories have fair market value equal to 120% of the balance. How much should Perry contribute to the partnership?