Question & Answer

Laura Davis is a member in a limited liability company that has historically been profitable but is expecting to generate losses in the near future because of a weak local economy. In addition to the hours she works as an employee of a local business, she currently spends approximately 150 hours per year helping to manage the LLC. Other LLC members each work approximately 175 hours per year each in the LLC, and the time Laura and other members spend managing the LLC has remained constant since she joined the company three years ago. Laura’s tax basis and amount at-risk are large compared to her share of projected losses; however, she is concerned that her ability to deduct her share of the projected losses will be limited by the passive activity loss rules. a. As an LLC member, will Laura’s share of losses be presumed to be passive as they are for limited partners? Why or why not? [Hint: See §469(h)(2); Garnett v. Comm’r, 132 TC 368 (2009); and Prop. Reg. § 1.469-5(e)(3)(i).] b. Assuming Laura’s losses are not presumed to be passive, is she devoting sufficient time to the LLC to be considered a material participant? Why or why not? c. What would you recommend to Laura to help her achieve a more favorable tax outcome?

In the accelerationist model, if the government tries to maintain unemployment below the natural rate, what will determine the speed at which inflation accelerates?

The accounting staff of Holder Inc. has prepared the following postretirement benefit worksheet. Unfortunately, several entries in the worksheet are not decipherable. The company has asked your assistance in completing the worksheet and completing the accounting tasks related to the pension plan for 2014.   Instructions (a) Determine the missing amounts in the 2014 postretirement worksheet, indicating whether the amounts are debits or credits. (b) Prepare the journal entry to record 2014 postretirement expense for Holder Inc. (c) What discount rate is Holder using in accounting for the interest on its other postretirement benefit plan? Explain.

In a complete JW model, what else would cause the JW curve (a) to shift to the right: (b) to shift to the left?

What are the three ways in which a threaded fastener can fail during tightening?

What is the main purpose of the Pension Benefit Guarantee Corporation (PBGC)? (LO3)

1. The income–consumption curve in Figure 4.12 is drawn as positively sloped at low levels of income. Why? 2. Show the effect of a rise in income on the demand for X and Y where this time Y is the inferior good and X is the normal good. Is the income–consumption curve positively or negatively sloped?

What role does a corporation’s audited income statement play in determining its taxable income?

Define bulk density and true density for metallic powders.

Describe how a business adopts a permissible accounting method. Explain whether a taxpayer can adopt an impermissible accounting method.

If production were at a point on the production possibility curve below point S, describe the process whereby market forces would return the economy to point S.

What is dip brazing?

Explain why the loan loss provisions of most banks could increase in a particular period. (LO2)

What is the difference between internal broaching and external broaching?

Matt Perry, Inc. had outstanding $6,000,000 of 11% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued $9,000,000 of 10%, 15-year bonds (interest payable July 1 and January 1) at 98. A portion of the proceeds was used to call the 11% bonds at 102 on August 1. Unamortized bond discount and issue cost applicable to the 11% bonds were $120,000 and $30,000, respectively. Instructions Prepare the journal entries necessary to record issue of the new bonds and the refunding of the bonds.

In 2014, Ghostbusters Corp. spent $420,000 for “goodwill” visits by sales personnel to key customers. The purpose of these visits was to build a solid, friendly relationship for the future and to gain insight into the problems and needs of the companies served. How should this expenditure be reported?

A partial trial balance of Julie Hartsack Corporation is as follows on December 31, 2015. Dr. Cr. Supplies $ 2,700 Salaries and wages payable $ 1,500 Interest receivable 5,100 Prepaid insurance 90,000 Unearned rent –0– Interest payable 15,000 Additional adjusting data: 1. A physical count of supplies on hand on December 31, 2015, totaled $1,100. 2. Through oversight, the Salaries and Wages Payable account was not changed during 2015. Accrued salaries and wages on December 31, 2015, amounted to $4,400. 3. The Interest Receivable account was also left unchanged during 2015. Accrued interest on investments amounts to $4,350 on December 31, 2015. 4. The unexpired portions of the insurance policies totaled $65,000 as of December 31, 2015. 5. $28,000 was received on January 1, 2015, for the rent of a building for both 2015 and 2016. The entire amount was credited to rent revenue. 6. Depreciation on equipment for the year was erroneously recorded as $5,000 rather than the correct figure of $50,000. 7. A further review of depreciation calculations of prior years revealed that equipment depreciation of $7,200 was not recorded. It was decided that this oversight should be corrected by a prior period adjustment. Instructions (a) Assuming that the books have not been closed, what are the adjusting entries necessary at December 31, 2015? (Ignore income tax considerations.) (b) Assuming that the books have been closed, what are the adjusting entries necessary at December 31, 2015? (Ignore income tax considerations.) (c) Repeat the requirements for items 6 and 7, taking into account income tax effects (40% tax rate) and assuming that the books have been closed.

What is an electrolyte?

Alan inherited $100,000 with the stipulation that he “invest it to financially benefit his family.”  Alan and Alice decided they would invest the inheritance to help them accomplish two financial goals: purchasing a Park City vacation home and saving for their son Cooper’s education.     Vacation Home Cooper’s Education Initial Investment $50,000 $50,000 Investment Horizon 5 years 18 years   Alan and Alice have a marginal income tax rate of 32 percent (capital gains rate of 15 percent) and have decided to investigate the following investment opportunities.     5 Years Annual After-Tax Rate of Return 18 Years Annual After-Tax Rate of Return Corporate bonds (ordinary interest taxed annually) 5.75%   4.75%   Dividend-paying stock (no appreciation and dividends are taxed at 15%)   3.50%     3.50%   Growth stock Future Value is $65,000   Future Value is $140,000   Municipal bond (tax-exempt) 3.20%   3.10%     Complete the two Annual After-Tax Rate of Return columns for each investment and provide investment recommendations for Alan and Alice.

Rubio recently invested $20,000 (tax basis) in purchasing a limited partnership interest. His at-risk amount is $15,000. In addition, Rubio’s share of the limited partnership loss for the year is $22,000, his share of income from a different limited partnership is $5,000, and he has $40,000 in wage income and $10,000 in long-term capital gains. a. How much of Rubio’s $22,000 loss is allowed considering only the tax basis loss limitations? b. How much of the loss from part (a) is allowed under the at-risk limitations? c. How much of Rubio’s $22,000 loss from the limited partnership can he deduct in the current year considering all limitations?

What expenses are deductible when a taxpayer combines both business and personal activities on a trip? How do the rules for international travel differ from the rules for domestic travel?

Assume Jack and Jill, 25 and 75 percent shareholders, respectively, in UpAHill Corporation, have tax bases in their shares at the beginning of year 1 of $24,000 and $56,000, respectively. Also assume no distributions were made. Given the income statement above, what are their tax bases in their shares at the end of year 1?

What is calorizing?

What is meant by the term structural adhesive?

What is the difference between the traditional ceramics and the new ceramics, as far as raw materials are concerned?