You Decide 1

Betty Wilson’s venture of opening a Christian Coffee House in Belmont, NC, presents her with abundant opportunities in selecting a business form. She is considering the following types of entities: 1) franchise, 2) sole proprietorship, 3) partnership of some sort, 4) corporation of some sort, 5) LLC, or 6) even as a joint venture. We will briefly explore each business option and give Betty concise recommendations as to what business form to pursue as well as what business partners to engage.

Part 1: Partnership formation. In January of 2010, Jason and Jesse contribute the following assets to

In the last several years, as we have seen some of the major financial conglomerates collapse, when Wall Street carries some negative connotation, investors’ attention turns to the companies who work primarily with Main Street, specifically those folks who create capital and own assets. A lot of these businessess would not strike you as super wealthy, yet it is the small businesses that proved to be the most resilient during the hard economic times.

d) If your hobby activity produces income, you owe tax on it. And if your hobby activity keeps bringing in income over years, you will have tax benefits to set up a separate business for the activity because you can deduct ordinary and necessary expenses from the income to lower your taxable income. When you have loss, you can also use it as a tax shelter to reduce your overall gross income (if you have other income sources).

Issue b) Can John and Jane Smith utilize a 1031 tax exchange to buy a more expensive house using additional money from John's case?

c. How could the transaction be structured a different way to get a better result for

5. (TCOs 1, 2, 8, 9, and 10) One of your best individual clients is thinking about starting up a new business, and he is seeking your advice on which business form he should select. In particular, he’s trying to decide whether to operate the business as a partnership or a C corporation. Explain to him the significant tax and nontax issues that will arise from choosing each of these entities compared to the other, including how

c. The Johnsons own a piece of investment real estate. They paid $500 of real property taxes on the property and they incurred $200 of expenses in travel costs to see the property and to evaluate other similar potential investment properties.

18) Barbara sells a house with an FMV of $170,000 to her daughter for $120,000. From this transaction, Barbara is deemed to have made a gift (before the annual exclusion) of

3. Allen visits Reno, Nevada, once a year to gamble. This year his gambling loss was $25,000. He commented to you, “At least I didn’t have to pay for my airfare and hotel room. The casino paid that because I am such a good customer. That was worth at least $3,000. “What are the relevant tax issues for Allen?

ISSUE: Whether or not Jackie’s Social Security benefits must be reported as taxable income to the IRS, if so, to what extent, and how the municipal bond interest income affects the tax treatment of the Social Security benefits.

However, raising taxes on the rich and corporations is not as helpful to our economy as most people think. Although raising taxes on the top percent of people and companies appears to create more income for the government, the result will make it harder for middle class and lower class citizens to grow. Some argue that by combining several key changes, including the simplification of the tax code to avoid loopholes and the decrease of taxes on the rich and corporations, there will be an improvement in the national economy. Although this may seem a bit counterintuitive, it makes more sense when looked at closely. By lower taxes and remove all loopholes, smaller businesses are given further opportunities to grow instead of facing financial roadblocks and government

2. According to Sec. 351, Paula recognizes no gain, because she does not receive any boot.

9. (Ignore income taxes in this problem.) The Crawford Company is pondering an investment in a machine that

Breaking down self-employment tax can be classified into two realms. First being in the form of an individual’s income derived by their trade or business and the second being the income or loss by the individual’s partnership of said trade or business. This self employment tax is levied on income in excess of $400 and is in exclusion of real estate rentals, dividends, interest, capital gains tax,