1. Over the past several years, Ms. Barton acquired the following shares of stock in Dynamic...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
1. Over the past several years, Ms. Barton acquired the following shares of stock in Dynamic Engineering Inc.: Date Acquired 9/25/08 4/2/13 8/28/17 11/18/19 Number of Shares 1,900 800 2,500 1,000 Cost (Per Share) $62.00 $70.00 $72.00 $75.00 The shares acquired on August 28, 2017, are qualified small business stock; the remainder of the shares are not. On October 15, 2020, Ms. Barton agreed to sell 1,200 of her shares in Dynamic Engineering to an unrelated party for $90 per share. Which shares would you advise Ms. Barton to sell in order to maximize the post-tax cash flows from her investment in Dynamic Engineering, and why? Additionally, calculate the post-tax cash flow resulting from the course of action you would recommend to Ms. Barton, assuming she is in the 35% ordinary income tax bracket and 15% long-term capital gains tax bracket. 2. Ms. Wolcott purchased a limited interest in Hance Partnership in 2020. Hance reported a net loss for 2020; Ms. Wolcott's share of this loss was ($7,000). Besides her investment in Hance, Ms. Wolcott had no other investments in passive activities in 2020. Hance projects that it will operate at "break-even" for the next several years. However, given Hance's excellent longer- term prospects, Ms. Wolcott has no desire to sell her investment in the partnership. Now in 2021, Ms. Wolcott is considering making one of three alternative $300,000 investments: • Investment A is a limited interest in Granite Partnership. If Ms. Wolcott makes this investment, she expects her share of Granite's 2021 business income to be $20,000. Investment B is an investment in a taxable bond fund that is expected to return 7% in interest income per year. • • Investment C is in Sapphire Inc. corporate stock that is expected to pay $18,000 in qualified dividends per year. Assuming that Ms. Wolcott's ordinary income tax rate is 35% and long-term capital gains tax rate is 15%, which investment (i.e., Granite Partnership, the bond fund, or the corporate stock) would yield the greatest post-tax return in 2021? 1. Over the past several years, Ms. Barton acquired the following shares of stock in Dynamic Engineering Inc.: Date Acquired 9/25/08 4/2/13 8/28/17 11/18/19 Number of Shares 1,900 800 2,500 1,000 Cost (Per Share) $62.00 $70.00 $72.00 $75.00 The shares acquired on August 28, 2017, are qualified small business stock; the remainder of the shares are not. On October 15, 2020, Ms. Barton agreed to sell 1,200 of her shares in Dynamic Engineering to an unrelated party for $90 per share. Which shares would you advise Ms. Barton to sell in order to maximize the post-tax cash flows from her investment in Dynamic Engineering, and why? Additionally, calculate the post-tax cash flow resulting from the course of action you would recommend to Ms. Barton, assuming she is in the 35% ordinary income tax bracket and 15% long-term capital gains tax bracket. 2. Ms. Wolcott purchased a limited interest in Hance Partnership in 2020. Hance reported a net loss for 2020; Ms. Wolcott's share of this loss was ($7,000). Besides her investment in Hance, Ms. Wolcott had no other investments in passive activities in 2020. Hance projects that it will operate at "break-even" for the next several years. However, given Hance's excellent longer- term prospects, Ms. Wolcott has no desire to sell her investment in the partnership. Now in 2021, Ms. Wolcott is considering making one of three alternative $300,000 investments: • Investment A is a limited interest in Granite Partnership. If Ms. Wolcott makes this investment, she expects her share of Granite's 2021 business income to be $20,000. Investment B is an investment in a taxable bond fund that is expected to return 7% in interest income per year. • • Investment C is in Sapphire Inc. corporate stock that is expected to pay $18,000 in qualified dividends per year. Assuming that Ms. Wolcott's ordinary income tax rate is 35% and long-term capital gains tax rate is 15%, which investment (i.e., Granite Partnership, the bond fund, or the corporate stock) would yield the greatest post-tax return in 2021?
Expert Answer:
Answer rating: 100% (QA)
1 To determine which shares Ms Barton should sell in order to maximize posttax cash flows from her investment in Dynamic Engineering we need to consider the tax implications of each share First lets i... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
Posted Date:
Students also viewed these law questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
What levels of visibility may be assigned to an attribute or an operation?
-
Jen, in Exercise 2.2, may buy Stock A or Stock B. Stock A has a 50% chance of being worth $100 and 50% of being worth $200. Stock B's value is $50 with a change of a half or $250 with a probability...
-
Tom Alexander has an opportunity to purchase any of the investments shown in the following table. The purchase price, the amount of the single cash inflow, and its year of receipt are given for each...
-
For each of the following situations, calculate a \(95 \%\) confidence interval for the mean ( \(\sigma\) not known), beginning with the step, "Calculate the degrees of freedom ( \(d f\) ) and...
-
Northern Communications has the following stockholders' equity on December 31, 2018: Requirements 1. Assuming the preferred stock is cumulative, compute the amount of dividends to preferred...
-
a) Let R be the relation on the set A = {1, 2, 3, 4} defined by R = {(x, y)/x + 3y 12}. Find the matrix representing R R. b) Suppose that the relation R is defined on the set Z where aRb means: ba",...
-
On January 2, Todd Company acquired 40% of the outstanding stock of McGuire Company for $205,000. For the year ending December 31, McGuire earned income of $48,000 and paid dividends of $14,000....
-
2. (a) Identify atomic sentences employed in the compound sentence, and assign sentence constants (i.e., sentence abbreviations); and (b) Symbolize the compound sentence using the sentence constants...
-
A form of general partnership agreement (the "contract") is attached to this assignment. Read through the contract to familiarize yourself with its contents and then answer the following questions...
-
How do social issues impact the rate of juvenile delinquency? Provide a least two specific examples in your description using 175-200 words.
-
Having a good combination of Human Resources is vital to the success of any project. In that context, explain the role played by a Project Manager and a Project Director. In what way do their roles...
-
What would the advantages and disadvantages of a new information system be for a corportation? Identify the type of information system this would represent. What ethical problems might this type of...
-
1. Solve this general system of linear equations: 2. 3. X 2y = 5 2 + 3 3 3 3x + 2y = 7 (a) (b) x+ 2y 3z + 2t = 2 2x + 5y - 8z +6t = 5 3x + 4y - 5z + 2t = 4 x+2y+4z- 5t = 3 3x - y+ 5z + 2t = 4 5x -...
-
One Way Cellular accountants have assembled the following data for the year ended September 30, 2014: Prepare the operating activities section using the indirect method for One Way Cellulars...
-
List four possible causes of goodwill.
-
The following information is taken from the records of the Aden Company: Required What is the correct inventory value if the company applies the lower of cost or market to each of the following? 1....
-
During 2007 the Dana Company decided to begin investing its idle cash in marketable securities. The information contained below relates to Danas 2007 marketable security transactions: Feb. 3...
-
What are the key differences between financing entrepreneurial and established companies?
-
What steps are needed to show that entrepreneurial finance is beneficial to the economy at large?
-
What are the main challenges that entrepreneurs and investors face at the four steps of the funding cycle, as described in the FIRE framework?
Study smarter with the SolutionInn App