Sixteen years ago, Biff, Buffy, and Buffy, Jr. organized Beach Wear Inc. (BWI) to sell beach...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Sixteen years ago, Biff, Buffy, and Buffy, Jr. organized Beach Wear Inc. (BWI) to sell beach wear throughout California. The sole class of common stock of BWI is owned by Buffy (60%) and her husband, Biff (20%), and Buffy. Jr. (20%). On December 1 of the tax year specified for the exam, BWI files an S election. As of December 31 of that same tax year, BWI's balance sheet includes the following: Asset FMV AB Accounts Receivable $300,000 Payments Due Under Installment Sale $0 $450,000 $600,000 Machinery $225,000 $0 During the next tax year, BWI collected the accounts receivable receiving $300,000. BWI also collected the one of two payments still due on the installment sale of $300,000. BWI's taxable income for the same tax year is $900,000. BWI of the statement above holds real estate for investment at the time of its S election. Its S election is effective January 1 of the tax year specified as the next year (after the year specified for the exam). During that same tax year, it sells land for $915,000 less 10% costs with a basis of $300,000. Installment payments are made of $165,000 in the same tax year, $150,000 in the next tax year, $150,000 in Year 3, $450,000 in Year 4. BWI's income from operations was $300,000 in Year 1, a loss of $150,000 in Year 2, income of $450,000 in Ye 3, and income of $600,000 in Year 4. O a. In Year 2, BWI will owe no built-in gain tax under 1374(d)(2)(A). O b. In Year 3, BWI will owe built-in gain tax based on $150,000 collected times 57.21% gross profit percentage times 21% or $18,021. Oc In Year 3, BWI will owe twice as much built-in gain tax as answer B or $36,042. O d.A and B. O e.A and C. Sixteen years ago, Biff, Buffy, and Buffy, Jr. organized Beach Wear Inc. (BWI) to sell beach wear throughout California. The sole class of common stock of BWI is owned by Buffy (60%) and her husband, Biff (20%), and Buffy. Jr. (20%). On December 1 of the tax year specified for the exam, BWI files an S election. As of December 31 of that same tax year, BWI's balance sheet includes the following: Asset FMV AB Accounts Receivable $300,000 Payments Due Under Installment Sale $0 $450,000 $600,000 Machinery $225,000 $0 During the next tax year, BWI collected the accounts receivable receiving $300,000. BWI also collected the one of two payments still due on the installment sale of $300,000. BWI's taxable income for the same tax year is $900,000. BWI of the statement above holds real estate for investment at the time of its S election. Its S election is effective January 1 of the tax year specified as the next year (after the year specified for the exam). During that same tax year, it sells land for $915,000 less 10% costs with a basis of $300,000. Installment payments are made of $165,000 in the same tax year, $150,000 in the next tax year, $150,000 in Year 3, $450,000 in Year 4. BWI's income from operations was $300,000 in Year 1, a loss of $150,000 in Year 2, income of $450,000 in Ye 3, and income of $600,000 in Year 4. O a. In Year 2, BWI will owe no built-in gain tax under 1374(d)(2)(A). O b. In Year 3, BWI will owe built-in gain tax based on $150,000 collected times 57.21% gross profit percentage times 21% or $18,021. Oc In Year 3, BWI will owe twice as much built-in gain tax as answer B or $36,042. O d.A and B. O e.A and C.
Expert Answer:
Answer rating: 100% (QA)
Answer C In Year 3 BWI will owe twice as much builtin gain tax as answer B or 3... View the full answer
Related Book For
Cornerstones of Financial and Managerial Accounting
ISBN: 978-1111879044
2nd edition
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen
Posted Date:
Students also viewed these accounting questions
-
The Burken Co. has one class of common stock outstanding and no other securities that are potentially convertible into common stock. During year 10, 100,000 shares of common stock were outstanding....
-
The SSC Partnership, a cash-method partnership, has a balance sheet that includes the following assets on December 31 of the current year: Basis FMV Cash $180,000 $180,000 Accounts receivable -0-...
-
Wilton Corporation has a single class of common stock outstanding. Robert owns 100 shares, which he purchased in 2009 for $100,000. In 2015, when the stock is worth $1,200 per share, Wilton declares...
-
Danis Inc is an American firm. The company will receive 626,000 British pounds (GBP) from one of its trading partners in 30 days. The company has obtained an analyst report for possible foreign...
-
Carla borrowed $1200 from the Royal Bank at 8.5% per annum calculated on the monthly unpaid balance. She agreed to repay the loan in blended payments of $180 per month. Use the design shown in Figure...
-
Both the entrepreneur and investor prefer higher exit values. The entrepreneur also prefers higher valuations, but the investor prefers lower valuations. Why?
-
Which of the following is not an activity of the HIMSS-SIIM Enterprise Imaging Community? (a) Webinar series (b) Publication of white papers (c) Networking (d) Membership outreach (e) Mentorship...
-
Jimmy Jones operates Jimmys Cricket Farm in Eatonton, Georgia. Jimmys raises about 18 million crickets a month. Most are sold to pet stores at $ 12.90 for a box of 1,000 crickets. Pet stores sell the...
-
1- Describe the error in the following code excerpt. for (int i = 1; i = 10; i++) System.out.println("This is the loop body"); 2- Change the code such that when it runs, the print statement is...
-
You are planning a meeting with a new Audit client, Oscars Limited in respect of their audit coming up shortly. The company recently converted to a company from a partnership and has its year end as...
-
Bobby received a gift of 500 shares of J Corp stock from his aunt on 6-30-16. On the date of the gift, the FMV of the stock was $86,000. Aunt had purchased the stock in 2001 for $44,000. The gift tax...
-
Of what offense was Scrushy ultimately convicted?
-
Select the statement that is least accurate: 1. Following the money can only be performed if those assets remain in their original identifiable form as they flow from place to place or person to...
-
What is the name of the software program that tracks a PC users keystroke activity and alerts the cyber-gang each time the PC user logs into their bank account?
-
What was Barry Minkows original business?
-
How long was Mr. Scrushys prison sentence?
-
You were recently hired by Boat Builders Construction (BBC) as the assistant controller in Chula Vista, CA. BBC has multiple locations. Your office is located at: 870 G Street, Chula Vista, CA 91910....
-
14. In testing the existence assertion, an auditor ordinarily works from the a. Financial statements to the accounting records. b. General journal to the general ledger. c. Supporting evidence to the...
-
Sondrini Corporation sold $1,500,000 face value of bonds at 103 on December 31, 2011. These bonds have an 8 percent stated rate and mature in four years. Interest is payable on June 30 and December...
-
What is meant by controlling?
-
Why are perpetual inventory systems more expensive to operate than periodic inventory systems? What conditions justify the additional cost of a perpetual inventory system?
-
One of the main fears that retail startups have is if they will be able to compete against Walmart, Home Depot, and the other big-box stores. This is a legitimate fear. Big-box stores continue to...
-
Influencer marketing is a type of marketing where companies partner with influencers, who have a significant following on social media platforms, to promote their products or services. Influencers...
-
In the summer of 2015, Stephen Kuhl and Kabeer Chopra made their way to Philadelphia to prepare for business school. It was their first semester in the Wharton MBA program. They were both in an...
A Tugmans Tale Life Aboard Thames Steam Tugs In The 1960s 1st Edition - ISBN: 2956327909 - Free Book
Study smarter with the SolutionInn App