Question: Mr RH purchased 30 acres of undeveloped ranch land 10
Mr. RH purchased 30 acres of undeveloped ranch land 10 years ago for $935,000. He is considering subdividing the land into one-third-acre lots and improving the land by adding streets, sidewalks, and utilities. He plans to advertise the 90 lots for sale in a local real estate magazine. Mr. RH projects that the improvements will cost $275,000 and that he can sell the lots for $20,000 each. He is also considering an offer from a local corporation to purchase the 30-acre tract in its undeveloped state for $1.35 million. Assuming that Mr. RH makes no other property dispositions during the year and has a 35 percent tax rate on ordinary income and a 15 percent tax rate on capital gain, which alternative (develop or sell as is) maximizes his cash flow?
Answer to relevant QuestionsFor its first four years of operation, Corporation Y reported the following taxable income: In 2015, Corporation Y generated $900,000 ordinary income and recognized a $20,000 loss on the sale of a capital asset. It is ...If a corporation engages in a nontaxable exchange of assets, could the transaction result in a book/tax difference? Is this difference a permanent or a temporary difference? Refer to the facts in the preceding problem, but assume that ML exchanged the residential rental property for the 20 acres of investment land plus $22,000 (i.e., ML received cash in the exchange). a. Assuming that ML’s ...Calvin Corporation’s office was burglarized. The thieves stole 10 laptop computers and other electronic equipment. The lost assets had an original cost of $35,000 and accumulated tax depreciation of $19,400. Calvin ...KAI, a calendar year corporation, reported $500,000 net income before tax on its financial statements prepared in accordance with GAAP. The corporation’s records reveal the following information: • KAI received an ...
Post your question