Corporate Tax Decisions and Strategies - Chapter 2

In: Business and Management

Submitted By Veleau
Words 258
Pages 2
Problem Assignments
38. Kevin deliberately omitted $40,000 of gross income from the restaurant that he owned from his 2012 tax return. The return indicates gross income of $ 200,000 when he files it on April 14 2013. As of what date can the IRS no longer pursue Kevin with the threat of collection of the related tax, interest, and penalties?

Answer:
There is no statute of limitation. The IRS can pursue Kevin with additional taxes, interest, and penalties if they are able to prove fraud was committed by deliberately omitted $40,000 of gross profit. However if the IRS is unable to prove Kevin deliberately omitted $40,000 of gross income as fraud expire date would be April 15, 2016.

42. When Keith created a new corporation as a sole shareholder, he was advised by his accountant to treat 50 percent of the amount invested as a loan and 50 percent as a purchase of stock. What are the advantages and disadvantages of this structure as compared with treating the entire investment as a purchase of stock?

Answer:

The advantages of treating 50 percent of the amount invested as a loan and 50 percent as a purchase of stock this structure as compared with treating the entire investment as a purchase of stock is Keith will be able to deduct interest from the company gross income as a sole shareholder and pay interest on the company debt. The disadvantage of not treating the entire investment as a purchase of stock is the dividends would be…...

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