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: ($20000) ($10000)($5000) $10000 and $50000 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 $30000 forthe first five years after which her compensation will be reviewed. Tony and Susaneach contribute $50000 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 $6000 per month.58. Michael buys a piece of property from JFK Partnership for $60000 that has a$70000 basis. Michael owns 80% of JFK partnership.59. Irene contributes land to Micro Development Partnership for a 30% interest. Theland s basis is $20000 and it has a fair market value of $80000. Micro reports a netoperating loss of $100000 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 Powell sbasis is $22000. Cooke reports a $90000 operating loss in 2010 and Powell withdraws$10000 from the partnership. Cooke s 2011 operating income is $70000 andPowell withdraws $10000 from the partnership.61. Ramrod Inc. sells a warehouse for $350000. It purchased the warehouse 10 years agofor $250000 and had taken $75000 in depreciation on the building to the date of sale.62. Myrtle Coast Corporation has a $35000 operating loss during the current year. Notincluded in the loss is a $40000 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. LMC s income consists solely of fees from the owners clients. During thecurrent year LMC s net income from operations is $380000 and it receives $20000in interest income. The corporation owns an interest in a limited partnership that generatesa $24000 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 $200000 taxable income in the current year.Included in the taxable income calculation are $20000 in dividends received fromless-than-20%-owned corporations and $30000 in charitable contributions.66. Milena owns a 25% interest in Davis Company an S corporation. Her basis in theDavis stock is $40000. Davis reports an operating loss of $200000 in the currentyear. Davis owes Milena $25000 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 $150000 to her in lieu of her normal cash distribution.Maupin s basis in the building is $55000. Charlene s b
